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Life After Bankruptcy: Will I Ever be a Homeowner Again?

  • Wednesday, April 9, 2014

    In a word, “yes.”

    If only it were that simple.

    Was your bankruptcy easy? Probably not.

    Was it easier than you thought? For most people, probably yes.

    Buying a house after bankruptcy is no different.

    Can I Buy a Home as soon as I Receive My Discharge?

    In a word, “no.” It would be great if it worked that way. Your bankruptcy is over. Your debts are gone. No creditors are calling and no one is trying to sue you. Wouldn’t it be nice if you could just walk into a bank and be approved for a mortgage? Although it can be done, purchasing a home after filing for bankruptcy is going to take some time and effort.

    What Steps do I Need to Take before I Can Buy a Home?

    It’s not just you, it’s me. In fact, it’s everybody. The days of easily qualifying for a mortgage are long gone. Years ago, if you could fog a mirror, you could buy a home. Now everybody is held to a higher standard.

    Score Yourself Some Credit

    After filing for bankruptcy, you are not going to have a good credit score. It’s just a fact of life. But you can work toward building it back up. In fact, if you work hard enough, within two years you can have a modestly good score; good enough to purchase a home no less.

    Here is what you can do about…

    • Pay your bills on time, every time without fail. One misstep here will cost you dearly.
    • Get a credit card and use it at least once a month. You will pay it off at the end of every month.
    • Keep paying on those student loans. Since they weren’t eliminated in the bankruptcy, they will still show up on your credit report.
    • Keep paying on your vehicles. Unless you reaffirmed (link to the reaffirmation blog article) you will not see these payments on your credit report. However, they can still help your credit. Just obtain a finance history from the finance company along with your cancelled payment checks and take them to the bank when you apply for your mortgage.
    • Clean up your credit report. Get a copy from each agency and make sure it accurately reflects your financial history. A mortgage company will sometimes help you with this process.

    Show Me the Money!

    Oh, how we long for the days of a mortgage without a down payment. These days, the industry standard seems to be 20% down. I’m not saying you won’t be able to buy a home with less, but you will be hard-pressed to find somebody who has done so in recent memory.

    Here are some options to build your savings…

    • Budget, budget, budget!
    • Work extra hours or take a part-time job
    • Have a garage sale
    • Set up automatic withdrawals from your check to a savings account
    • Use coupons
    • Eat more meals at home
    • Unplug from things like cable and expensive internet and data plans

    The possible ways to save are virtually endless.

    With a little hard work and determination, you can probably be in a position to buy a new home in just two years after your discharge. So get cracking!

     





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