There are many misconceptions about life after bankruptcy, particularly the notion that bankruptcy is a death sentence to obtain future credit and/or loans. Just because you had financial problems in the past does not mean that you can’t build a great financial future. If you have filed for bankruptcy, you may be wondering whether you are able to get a mortgage.
Can I Qualify for a Mortgage If I've Filed for Bankruptcy?
It is possible for people to get a mortgage after they've filed for bankruptcy. However, there is usually a waiting period after the discharge, which can range from a year to several years. During that waiting period, you should work on building your credit and keeping your history clean.
If you are able to get a mortgage, you may pay higher interest rates or be given less favorable terms due to your bankruptcy history. Having a foreclosure on y our record can also prolong the mortgage process. Each lender has different guidelines, so you should do some research to learn your options.
Tips on Getting Approved for a Mortgage
Start Working On Your Credit Score
It is absolutely true that your credit score takes a big hit when you file for bankruptcy. But, like any damaged structure, you can rebuild it. Start right away by taking out a credit card and keeping its balance paid off every single month.
If you can show good financial sense and the ability to pay your debts consistently, your credit score will slowly but surely rise. The higher it rises, the more chance you will have to get approved for a mortgage.
Utilize Assistance Programs
Besides offering bankruptcy protection, the government has several other programs designed to help people realize their homeownership dreams.
- Under The Federal Housing Administration (“FHA”) Program, the government will back up your loan, promising to foot the bill if you become unable to. These loans also usually carry a relatively low down payment requirement, which is perfect for people who haven’t had much time to save money.
- If you are a Veteran and qualify for a VA loan, these loans usually do not require a down payment and come with lower interest rates.
A simpler assistance program is the co-sign system. A family member or close friend can guarantee the repayment of your loan, making a bank more comfortable with extending the loan to someone with a less than perfect credit history.
Practice Good Money Management
The best thing you can do for your mortgage chances is simply to exercise good money management. Don’t take out multiple loans that you don’t need, or a mortgage lender will get very nervous about putting yet another burden on your budget.
Make sure that the mortgage payment you are facing is really workable within your income scale. A professional counselor can help you with these questions and get your homeownership off to a great start—even after bankruptcy.