Home Loans After Bankruptcy – Buying a Home after a Bankruptcy
Filing for personal bankruptcy deals a big blow on your credit score. It takes up to ten years before this information can be taken out from your credit record. This poses a problem if you need to get a home loan, but it is not a hopeless situation.
The first thing you have to check on is the closure of open and overdue accounts showing on your credit record before your bankruptcy. If these accounts are still open on your credit report, you need to contact the consumer reporting agencies and inform them that these accounts should be treated and reported as part of the bankruptcy.
You also have to ensure that all other information showing up on your credit report is accurate. Any inaccuracies would have to be reported to the credit bureaus so they can take the necessary actions to correct them.
While it would seem that shying away from using credit after bankruptcy would prevent the repetition of mistakes, this would not help in rebuilding your credit score and reputation. One way of getting around the difficulty of getting approved for credit cards is to apply for a secured credit card. A secured credit card uses the deposit in a companion savings account as its collateral. The credit limit for this type of card would be the same amount as the deposit in the savings account, typically a minimum of $200 or $500. Choose a secured credit card that has no application fee and a minimal annual fee. You also need to ensure that the issuing financial institution reports credit activities to the three major credit bureaus: Equifax, Experian, and TransUnion. To gain the most improvements on your credit score, avoid using up more than 30% of your credit limit and pay-up the full balance every month.
If you consistently display good credit behavior, you can usually qualify for a home loan six months after bankruptcy, albeit with a high interest rate. Waiting two years after bankruptcy would most often qualify you for an FHA loan, which carries interest rates that are only about a half point higher than regular mortgage rates.
