People who want to buy their own home should work to keep their credit score high. This is possible if you pay your bills on time, have a low ratio of debt to income, and so on. Still, there are many lenders who are happy to give home loans to people with bad credit. The interest rate on these mortgages is higher, so the monthly payment is also higher. Even if you have bad credit, you can still get a mortgage, but if you've been bankrupt, the process is a little different.
There are two kinds of bankruptcy
There are two different ways to go bankrupt. In a Chapter 7 bankruptcy, all debts are wiped out and do not have to be paid back. Chapter 13 bankruptcy, on the other hand, means paying back part of the debt over a set amount of time. Most of the time, filing for bankruptcy should be the last resort and not a quick fix for bad credit. A person can file for bankruptcy for a lot of different reasons. Some of these are high credit card and consumer debt, high medical bills, and so on. Lenders use the information in credit reports to decide if someone is creditworthy. A bankruptcy is a bad mark on your credit report that stays there for ten years. People who have filed for bankruptcy can expect to pay higher interest rates on car loans, mortgages, and credit cards for the next 10 years.
How long before buying a home should you wait?
It is possible to get a house after filing for bankruptcy, but people who have done so must meet certain requirements. After a Chapter 7 or Chapter 13 bankruptcy, you must wait at least two years after the bankruptcy is over before you can get a mortgage. Also, people who have had their bankruptcy case thrown out must wait two years before they can apply for a mortgage. During this 24-month time period, people should try to rebuild their credit history. Get a line of credit from at least three or four creditors if you can. Right after you file for bankruptcy, the best thing you can do is get a secured credit card or a credit card with a high interest rate. But once you have shown these creditors that you can pay on time, you may be able to get credit card offers with reasonable rates.
