You may have heard that you will be required to wait a specified period of time before you can apply for a mortgage after a bankruptcy. This is simply not true. There are no laws that require you to wait before applying for a mortgage after your debts have been discharged in bankruptcy. That isn’t to say that the process will be a piece of cake either, but there are ways to minimize the impact of a bankruptcy filing on your home buying process.
Getting Back On Track
Contrary to popular rumor, your life and credit are not severely damaged after a bankruptcy. In fact, many people see an improvement in their credit after a bankruptcy. However, this doesn’t mean you may not be viewed as a credit risk temporarily. The best way to get on track for owning a home after bankruptcy is proving your credit potential.
First, check your credit report for inaccuracies. It isn’t uncommon to find mistakes or misreported information on your credit report after a bankruptcy discharge. Be sure to dispute inaccurate information and obtain written documentation from creditors confirming that your prior debts have been satisfied. Monitor your credit report closely over the next few months.
Next, do not try and secure a home loan right away. In general, you want to minimize inquiries into your credit for the next 12 months while you rebuild your credit potential. Try securing a small, unsecured line of credit to maintain a manageable balance on. Make timely payments and keep your debt to limit ratio below 30-50 percent.
Last, shop around for the best mortgage loan. Just because you suffered financial instability in the past does not mean that you have to settle for a less than fair deal when applying for a mortgage. Do not allow multiple lenders to pull your credit information until you are absolutely ready to proceed with the application, but you can give them a ballpark idea of your credit standing when shopping around.