Many consumers with poor credit do not even consider buying a home after bankruptcy. While a bankruptcy does remain on your credit report for up to ten years, this does not mean you cannot seek credit during the entire ten-year time frame. Some people are able to purchase a home within one to three years of discharging their bankruptcy. The exact time frame will vary depending upon the reason for your financial difficulties and your credit history since filing for bankruptcy. The important point to remember is that you should not be embarrassed or intimidated about buying a home after bankruptcy. The longer you wait to purchase a home, the longer it will take you to accumulate equity. If you can prove to a lender that you have increased your credit rating and are no longer considered a risk, you will greatly improve your chances of being approved for a home loan. The amount of cash you are able to provide for a down payment will also influence the time it takes to buy a home after bankruptcy. If you have a substantial amount of cash for a down payment, you will find more lenders willing to consider your loan application. While there are zero percent down loans available, this will only increase the amount of interest you will have to pay. FHA Loans If you qualify, FHA loans are a good option for people who have previously filed for bankruptcy. Some lenders will approve a customers loan just one year after a bankruptcy has been discharged. However, the customer will be asked to supply documentation regarding the circumstances of the bankruptcy and proof of their current credit situation. The type of bankruptcy you filed, either Chapter 7 or Chapter 13, will also affect how long it takes to buy a home. If you filed for a Chapter 13 bankruptcy and are still making payments, many times the trustee will not let you apply for a loan until you have completed your payment plan. Interest Rates As expected, anyone who has previously filed for bankruptcy will most likely be charged a higher rate of interest and often a higher fee for obtaining the loan. These types of loans are often referred to as sub prime loans and are popular among customers who have a blemished or less than perfect credit history. |
