Getting credit after bankruptcy is very important. However, getting
approved for a credit card, auto loan, or home loan with a reasonable rate
is challenging. Still, the key to boosting credit score and rebuilding
credit is obtaining new accounts. It is possible to buy a home one day
after a discharge. Unfortunately, lenders will make you pay for past
mistakes by charging excessive rates and fees. If buying a home after
bankruptcy, consider the following steps.
Establish New Credit Accounts
If you apply for a home loan immediately following a bankruptcy, expect
unreasonably high rates. Because of past debts being eliminated, some
people feel that after bankruptcy is the perfect time to buy a home.
However, mortgage lenders think otherwise.
Regardless of whether you can afford a home, or your good intentions to
pay the mortgage, lenders will not view you as credit worthy. Some
lenders will quickly deny a home loan application, whereas others will
charge higher rates. Paying a high interest rate will greatly increase your
monthly mortgage payments. To avoid this common pitfall, attempt to
establish new credit accounts before buying a home.
Maintain Timely Payments to Creditors
After a discharge, you have the power to undue past mistakes and start
fresh. With this said, it is important to maintain regular payments.
New creditors are providing you with the opportunity to rebuild credit.
While bankruptcy will appear on your credit report for seven to ten
years, a high credit score following a past bankruptcy may open the door
for better rates. Thus, is it essential to pay bills on time and maintain
Postpone Buying a Home for 24 Months
Because of low mortgage rates and rising home prices, many people are
eager to buy a home. However, if you purchase a home immediately
following a bankruptcy, you will not be able to take advantage of low mortgage
rates. Instead, be patient and wait at least two years. During this
time, strive to improve your credit.
Use a Sub Prime Lender for Home Loan
Even with good credit, some home lenders will not offer reasonable
rates to people with past bankruptcies. However, sub prime mortgage lenders
work with all credit types. These lenders offer loans to people with
good credit, bad credit, foreclosures, bankruptcies, etc. Moreover, sub
prime lenders do not charge outrageous fees. They offer affordable bad
credit home loans, which allow more people to become homeowners.
View our recommended poor credit mortgage lenders online.
Go to ABC Loan Guide to get your personal credit report, and check out our sources to help you reduce credit card debt.