Declaring Chapter 7 or Chapter 13 bankruptcy can be stressful, unsettling and demoralizing and obtaining a mortgage after a bankruptcy can prove to be very difficult, however it is not impossible.
The most important thing to remember is that the bankruptcy must be discharged. If you are still in the process, or if you are still in "credit counseling" or any other program that takes over your finances, no mortgage lender will speak to you.
After bankruptcy most lenders want you to wait at least 2 years from the time of the bankruptcy discharge before they will consider you for a mortgage loan. Here are some additional tips on getting a mortgage after a bankruptcy:
Check Your Credit
Check your credit report after bankruptcy discharge to make sure it is accurate and that all debts have been closed and discharged.
Secured Credit Card
Obtain a secured credit card that reports to one of the major credit reporting bureaus. This is one of the fastest ways to start rebuilding your credit score after a bankruptcy. Prove to creditors and other lenders that you can be trusted to pay back the money you owe them. Make small purchases regularly and pay them in full when the bill comes due.
Save, Save, Save
Save for a large down payment. The larger the down payment the easier it will be to obtain a loan.
Payoff Another Loan
Take out a loan on your next large purchase. A car for example – making timely payments, and paying the loan off faster than agreed through larger payments will show that you can handle your debt more responsibly now.
After the two year period, make sure that you are fully prepared to apply for a loan. Your lender wants you to meet several criteria before agreeing to lend you money: a good debt to income ratio, stability and time on the job. Money in the bank and a zero bounced-check history help tremendously, of course. Any retirement plans or 401(k) assets makes your credit look good. And remember, money talks, so a big down payment carries a lot of weight. Save as much money as you can.