Individuals interested in purchasing their own home strive to maintain a positive credit rating. This is achieved by paying bills on time, having a low debt to income ratio, and so forth. Nevertheless, several lenders are eager to offer home mortgages to individuals with bad credit. These mortgages have a higher interest rate, which increases the monthly payment. Although a mortgage may be attained with bad credit, the course of action is slightly different for individuals who have filed bankruptcy.

Two Types of Bankruptcies

There are two types of bankruptcies. A chapter 7 bankruptcy involves complete liquidation in which debts do not have to be re-paid. On the other hand, a chapter 13 bankruptcy entails repaying a portion of the debt over a fixed period. For the most part, a bankruptcy should be the last alternative, and not a quick fix to credit problems. Many explanations cause a person to file bankruptcy. These include excess credit card and consumer debt, high medical bills, etc. Lenders determine credit worthiness based on information provided in credit reports. A bankruptcy is a negative remark that remains on credit reports for ten years. Throughout this 10-year period, individuals who filed bankruptcy can expect to pay higher interest rates on automobile loans, mortgages, and credit cards.

How Long Should You Wait Before Buying a Home

Obtaining a home after filing for bankruptcy is feasible; nonetheless, individuals who have filed must adhere to specific stipulations. To obtain a mortgage after filing a chapter 7 or chapter 13, you must wait at least two years after the bankruptcy is discharged. Moreover, individuals who have had a bankruptcy case dismissed must also wait two years before applying for a mortgage. During this 24-month period, it is recommended that person's re-establish their credit history. If possible, acquire a line of credit from at least three to four creditors. Immediately following a bankruptcy, a secured credit card, or a high interest credit card is your best option. However, once a good payment history is established with these creditors, you may be able to obtain credit card offers with reasonable rates.

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Carrie Reeder

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Each year, millions of people file bankruptcy as a means of erasing their consumer debts. While this approach may relieve stress, a bankruptcy is damaging, and will hang over your head for the next ten years. Still, it is possible to overcome bankruptcy. The key is making smarter financial and credit decisions. With this said, some people choose to purchase a home after a bankruptcy. Here are a few pointers to consider when buying a home. Reasons to Delay the Buying Process after Bankruptcy If you consult with mortgage or financial experts, they will likely discourage you from buying a home following a bankruptcy. After your bankruptcy is discharged, there is
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Congress recently passed the most sweeping bankruptcy legislation in more than twenty five years. The Bankruptcy Abuse prevention and Consumer Protection Act was written to make it harder for most personal bankruptcy filers to have their debt swept away through a Chapter 7 filing. The new law will require that potential bankruptcy filers pass a "means test" and most will not qualify for the Chapter 7 filing. Instead, they will have to file under Chapter 13, which requires a court-defined repayment schedule of up to five years. This legislation, considered by its detractors to be a "wet, sloppy kiss" to the credit card companies, has many people justifiably concerned
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