Those filing for bankruptcy soon that do not plan to keep their house should anticipate renting for a few years. Especially since the housing market has taken a dive, lenders have cracked down on mortgages. While there is still a niche market for high risk borrowers that make it possible to secure a home loan a handful of years after bankruptcy, it takes a considerable amount of effort rebuilding credit before one can secure a home loan.
Rebuild Credit First
Before the economic downturn, mortgage lenders had become somewhat lenient about credit history and home buyer qualifications. However, once foreclosures started to rise, lenders started tightening their proverbial belts, which turned many would-be home buyers into renters because they were unable to secure home loans.
Although bankruptcy stays on one’s credit report for 7-10 years, it’s still possible to secure a home loan after a few years as long as one’s credit bureau reflects positive rebuilding. This means that any debt that was re-affirmed as well as any new debt incurred since the bankruptcy must be current and have a history of staying current. Paying down things that could not be included in the bankruptcy, such as student loans, also releases one’s overall debt and demonstrates discipline in re-establishing credit and reforming one’s finances.
While there is no guarantee that mortgage lenders will be willing to work with one who follows these steps, they greatly improves one’s chances of being approved. Because it can be difficult to secure a home loan or lease immediately following bankruptcy, it’s typically recommended that, whenever possible, one re-affirm a home loan in a bankruptcy.