If you’ve recently declared personal bankruptcy, or you think you might file soon, you’re probably concerned about the prospect of ever buying a home. Since a bankruptcy stays on your credit report for a decade, you might be thinking you’ll have to keep renting for a long time to come.
Fortunately, this is not the case. You will be eligible for a FHA home loan two years after your bankruptcy is discharged. Your down payment will typically be the same as it would for any other FHA buyer – three percent. Your interest rate will probably be a percent or two higher than standard interest rates, but it won’t be as high as you might think.
If you want a conventional loan, you’ll have to wait four years after your discharge. For many buyers, though, the advantages of a conventional loan are negligible, so there is really no reason to wait an extra two years.
Of course, reestablishing your credit as soon as possible after your bankruptcy will improve your chances of getting a home loan.
You should get a credit card as soon as possible after the discharge, and make absolutely sure that your payments are made on time. Your timely payments will be reported to the three major credit bureaus, dramatically increasing your credit score. Having a credit card also shows lenders that you are committed to being responsible with your finances.
Buying a home after personal bankruptcy can be a bit more challenging than obtaining a mortgage with good credit, but it’s important to remember that bankruptcy won’t keep you from getting a home loan forever. In fact, most people are surprised at how quickly they can become homeowners!