Everything you Need to Know About Buying a Home After Bankruptcy

If you’ve had to file for bankruptcy, many aspects of your life have probably changed. You’re not alone. Millions of Americans file for bankruptcy each year. You may think you’ve permanently harmed your chances of buying a home—but this isn’t actually true. Buying a home after bankruptcy is entirely possible! Here’s how.

Focusing on Cultivating Healthy Financial Habits

You shouldn’t immediately go from filing bankruptcy to trying to get a house. You need some time to focus on getting your finances in order. Get a copy of your credit report to help you gauge where you’re at. Start budgeting! Document every dollar coming into your bank account and every dollar going out.

Start Building Good Credit

You might think that getting a credit card will just be setting you up for failure when you’re trying to build good financial habits. However, if you’re able to budget and pay your credit card bill on time, putting some of your expenses on plastic will help you build back your credit. Rather than using your credit card for shopping sprees, use it for your monthly bills. These are expenses you’ll have to pay for anyway, so you might as well be building good credit while doing it.

Save, Save, Save.

If you’re going to buy a house, you need to focus on saving. No matter how small the amount might be, you need to be putting away money on a consistent basis. If you’re having a hard time exercising self-control in this area, don’t make saving an option. Schedule an automatic transfer from your checking to your savings account each month.

Having a savings goal in mind will also help you! If you’re going to buy a house down the line, your goal should mainly be based on the down payment you want to make, but there are other expenses involved with buying a house. So you’ll want to save extra so you have a cushion for unexpected housing costs as well as monthly costs that are associated with owning a home. Staying on top of things like getting an appraisal and an inspection will help ensure there aren’t any major surprise expenses right away.

Organize Your Documents

One of the more unique aspects of buying a home after bankruptcy is you need extensive documentation of your financial situation. You should compile at least a few months of pay stubs, bank statements, tax returns, and other important financial documents. The earlier you start saving these documents, the easier it will be when you are actually in the process of buying a home.
Understand Waiting Periods for Each Loan Type

FHA Loan - To get a mortgage after bankruptcy with an FHA loan, here are the waiting periods based on the bankruptcy filing type.

  • Chapter 7 - Two years from discharge date
  • Chapter 11 - No waiting period
  • Chapter 13 - One year from discharge date

USDA Loan - If you are interested in applying for a USDA Loan, keep the following requirements in mind.

  • Chapter 7 - Three years from discharge date
  • Chapter 11 - No Waiting Period
  • Chapter 13 - One year from discharge date

VA Loan - Here are the waiting requirements to be aware of if you are applying for a VA loan after bankruptcy.

  • Chapter 7 - Two years from discharge date
  • Chapter 11 - No waiting period
  • Chapter 13 - One year from discharge date

Conventional Loan - Unlike government back loans, conventional loans have a longer waiting requirement after bankruptcy. Remember the waiting requirements below if you are interested in applying for a conventional mortgage.

  • Chapter 7 - Four years from discharge date
  • Chapter 11 - Four years from discharge date
  • Chapter 13 - Two years from discharge date or four years from dismissal date

Compare Lenders

Finally, you don’t always need work with the first lender you speak with. Shop around, compare, and see who can offer a loan that’s best for your situation. The best lenders will walk you through the different types of loans and all your options with you current finances in mind.

The Carolina Mortgage Team at Revolution Mortgage would be happy to help you through this process! We don’t want this time to be any more stressful than it already is. Get started by contacting us today!

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