Can you buy a house after bankruptcy?

Written by: leonora  |  Published on: October 29th, 2010  |  Category: Blog

Yes, you can buy a house after bankruptcy. See tips below for things to do to maximize your chances. Bankruptcy is a big decision that should not be taken lightly. I would never advise anyone to approach the potential bankruptcy filing as anything but a big step. However, some people think that bankruptcy is the END. They will never be able to have a credit card again and they can certainly forget about ever buying a house.

Guess what?

That’s VERY wrong!

You certainly CAN BUY A HOUSE after bankruptcy.

Can I guaranty that you will be able to buy a house? No, I can’t because ultimately it depends on WHAT YOU DO AFTER bankruptcy. What I can tell you is that bankruptcy alone will not be the reason why you can’t buy a house a few years after bankruptcy, just like it won’t be the reason why your credit score won’t go up. Just like with the actual FICO score, bankruptcy is not the problem, it is the payment history, the potential to pay back new/existing debt that hasn’t yet been discharged in bankruptcy, and your current employment that matters when you try to apply for a mortgage loan.

Assuming you don’t have a bag of cash sitting around (large enough to buy a house), your concern is not with being able to find a seller willing to sell a house to you, but rather finding a bank willing to finance your home purchase.

Here, is what the FHA Loan website says about it being able to pre-qualify for a home loan from them:

Prequalify for an FHA Loan
FHA home loans were designed to help Americans fulfill their dream of homeownership and are therefore the easiest type of real estate mortgage loan to qualify for. Among the home loan options available that require a minimal down payment, FHA loans are the most popular. In fact, the FHA loan is the most flexible type of home mortgage loan to qualify for.

The Essentials

  • Steady employment history, at least two years with the same employer.
  • Consistent or increasing income over the past two years.
  • Credit report should be in good standing with less than two thirty day late payments in the past two years.
  • Any bankruptcy on record must be at least two years old with good credit for the two consecutive years.
  • Any foreclosure must be at least three years old with good credit for the past three years.
  • Mortgage payment qualified for must be approximately 30 percent of your total monthly gross income.
  • If you can answer YES to these statements you should have no problem qualifying for an FHA home mortgage loan.

While prequalifying for a loan doesn’t necessarily guarantee that you will be able to purchase the home of your dreams, it does help you and potential lenders know your borrowing power and what you can afford in terms of a monthly mortgage payment. Prequalifying for a loan simply means that you have taken an inventory of your income and assets and submitted them to your potential lender. Based on that information you should be able to qualify for a home mortgage loan.
Don’t believe me? See it for yourself:

To conclude, it is not bankruptcy that will make it hard to qualify for a home loan, but rather avoiding your problems, not paying your bills, having a foreclosure on your record, not having steady employment, and not correcting mistakes on your credit report.

You CAN obtain a home loan after you discharge your debts in bankruptcy by:

  1. obtaining steady employment or showing a history of regular business income (via tax returns);
  2. making sure your credit report is accurate;
  3. not missing payments after the bankruptcy on your utility bills, car payments, credit cards; and
  4. waiting 2 years after bankruptcy to apply for an FHA home loan.


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