Many people believe that it isn’t possible to buy a home after you have a bankruptcy. However, there are avenues available to you if you want to own another home. The trick is to be creative with the type of loan you apply for.
FHA Loans Are Available For Those With A Bankruptcy
Buying a home after a bankruptcy is almost impossible if you go through a traditional lender. However, FHA loans are the perfect option if you are looking for a lender who will be sympathetic to your needs. You don’t even have to have your credit score completely repaired yet.
Borrowers can qualify for a loan with a credit score as low as 620. These standards are so low because the loans are guaranteed by the government. It is the perfect solution for anyone wondering how to buy a home after bankruptcy.
Be Prepared To Furnish More Information
Buying a home generally involves turning over tax returns, pay stubs and bank records. When you have just come off a bankruptcy, there is an even higher burden of proof on you. Make sure you have paid off any tax liens or judgments against you. Clearing away old debt will make you look like the responsible borrower you know you can be. Remember that you have to be able to document that you are at least 24 months removed from your bankruptcy to be considered for a FHA loan.
Get Ready To Pay Higher Interest Rates
Having a bankruptcy increases your credit risk. In order for a lender to take on this additional risk, banks often charge higher rates. Don’t be discouraged when you don’t get the rate shown in their advertising, most advertised rates represent highly qualified individuals that have very little to no credit risk.
However, the down payment requirements could be less stringent depending on the type of loan you apply for. The best thing you can do is to pay your loan on time for the next few years. This will allow you to build up your credit and possibly refinance the loan at a better rate in the future.
Purchasing a home after a bankruptcy is certainly something you should pursue. Just be sure that you can prove to the lender that you can be responsible with your money. Pay off past debts, work on improving your credit score and shoot for a government-backed loan. This will get you into your new home faster.