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How to Qualify for a Home Loan After a Bankruptcy

    Time Frame

    • Rebuilding credit after a bankruptcy and qualifying for a mortgage loan takes time and consistent effort. Give yourself time to re-establish credit and wait at least 24 months after your bankruptcy discharge before applying for a mortgage loan.

    Considerations

    • Secured credit cards are the easiest type of accounts to get after a bankruptcy. This is because these accounts require collateral or a security deposit paid to the credit card issuer. Having this deposit on hand means less risk for the creditor and they will be more willing to take a chance on someone who wants to rebuild their credit and qualify for a mortgage in the future with this type of account.

    Solutions

    • Maintaining credit and building a satisfactory credit score is the next step in qualifying for a mortgage after bankruptcy. Paying your credit card on time each month slowly repairs the damage from a bankruptcy and helps you work toward a good credit rating. The minimum credit score for a mortgage loan varies. For example, FHA loans only require a 650 credit score, while other lenders prefer scores of 680 or higher.

    Effects of Debt

    • Repeating past mistakes and re-acquiring debt after a bankruptcy makes it harder for you to qualify for a mortgage loan. Keep debts to a minimum after your bankruptcy to ensure that your monthly debt payments do not exceed 36 percent of your income.

    Warning

    • While a lender will likely approve you for a mortgage loan after a bankruptcy -- given that you rebuild your credit -- having a bankruptcy on your credit record can result in higher finance fees. Be prepared to pay a high interest rate and a higher down payment. Shopping around and talking with a mortgage broker about different loans can help you acquire a cheaper rate.

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