Can I buy a home after I file Chapter 7 Bankruptcy?

If you’ve been wondering what the answer is to this question, you can rest in the knowledge that the short answer is:  Yes…but, with conditions.

People file bankruptcy for many reasons including loss of a job, medical bills, divorce, borrowing more than they can afford to pay back, and the list goes on. However, as a Loan Officer at UHM, I know that filing for bankruptcy doesn’t mean your life is over. Before qualifying for a mortgage, you will likely need to wait for two years (or potentially longer, depending on the circumstances) from the discharged date of the bankruptcy, but there are some steps you can take while you wait.

1. Make sure you save all of your bankruptcy papers, including Discharge and all schedules. Your attorney should maintain copies of these documents, or you can go online and Google “bankruptcy papers.” For a small fee, you can obtain all of these documents, which are emailed to you with ecryption.
2. While it’s fresh on your mind, I also suggest that my clients write a brief letter explaining why they had to file bankruptcy. This letter gives you a chance to state your case and be as detailed as possible with your explanation. A written statement will come in handy when applying for a home since an underwriter is going to analyze why you filed for bankruptcy and see if your present financial situation is better.
3. Make sure you pay all your bills on time. You can also set up automatic bill pay online. Either way, it’s important to make sure you keep a record of payment.
4. If you have a credit card, it’s best to keep that balance at one-third of your limit or lower.
5. If you don’t have a credit card, a secured credit card can be obtained by most who apply. You simply put up the amount of your limit. My recommendation would be $300.00. The secret is to never borrow more than one-third of the limit on any given month. I would just charge your gas fill-up once a month and pay it off every month. If you start with Googling “Secured credit cards,” many vendors will pop up.
6. Pay your utility bills on time: gas, electric, phone, etc. If you pay these bills on time, the utility companies can give you a rating, which could strengthen your case.
7. Pay your rent on time and pay with a check, so you can keep a record of payments.
8. Start a budget and stick with it.
9. It’s important that during this time, you start to rebuild your credit profile in order to show that you’ve learned from this critical, one-time event.  It is also imperative that you display an understanding of budgeting and fiscal responsibility, as these items will be measured closely with your loan application.
10. Save for a down payment. Talk to a lender and they will be able to lead you to a figure that you will need for a downpayment.

When it comes to trying to get a home loan after filing for bankruptcy, it’s best to talk with a qualified Loan Officer so you can go over your finances and see what approach is best for your situation. If you’re interested in learning more about buying a home after bankruptcy or want to speak with a mortgage professional, feel free to contact Union Home Mortgage today.