Getting a Mortgage after Bankruptcy

Sometimes, bankruptcy may be your only play. In that case, be prepared to be denied access to loans/mortgage by lenders for the next 7-10 years — the length of time bankruptcy records remains on your credit report.

If you ever want to get a mortgage, you will have to wait until your bankruptcy has been discharged. It’s only then that you can start to repair the damage done to your credit score. The vast majority banks will still deny mortgage for two years after your bankruptcy has been discharged. Here are a few tips to you get a mortgage after bankruptcy:

Timely Payments

Ensure that for any line of credit that might be still open, make timely payments. If you have an auto loan, pay on time. Paying your open lines of credit on time is the best way to rebuild your credit score.

Get New Credit

To get a mortgage, you need a credit card on your credit report. You will not be able to obtain a credit card coming straight out of bankruptcy. You can, however, get a secured credit card. You will be required to open a savings account and make a deposit as security for the card. You cannot exceed the amount of your initial deposit. Offers from credit card companies will start coming in after 6-12 months of making timely payments.

Start Saving For a Down Payment

If your credit record is still poor, you better start saving. Making a down payment can help you secure a mortgage. You may also get a mortgage in the form a hard money loan, but you will be required to have at least a 30 percent down payment to qualify for a hard money mortgage.

Consider an FHA Loan

It will be hard to qualify for a mortgage with a less than stellar credit score. Luckily, there are other mortgage products designed to people with low credit scores. One of them is the FHA loan. FHA is a government funded loan program with a small down payment (3.5 percent) and is just good as a traditional loan.