Macco & Corey P.C.

How long after bankruptcy before you can secure a mortgage?

How long after bankruptcy before you can secure a mortgage?

One of the reasons that people often put off seeking the protections of bankruptcy is concern for their future financial situation. Many people believe that they will not be able to rebuild their credit for a long time after bankruptcy.

While it is true that filing bankruptcy will show up on your credit report for some time, failing to file bankruptcy could have a longer-lasting and more serious impact on your financial health. Many delayed or unpaid debts, as well as judgements, on your credit report will look much worse than a single entry from bankruptcy followed by on-time payments.

If you hope to own a home some day, discharging debt now and planning for a smarter approach to credit in the future may be your best option. That way, you won’t have the weight of extensive consumer debt holding you down when it is time to start house hunting.

You can start rebuilding credit almost immediately after bankruptcy

While a Chapter 7 bankruptcy remains on your credit report for 10 years and a Chapter 13 will stay for seven years, you don’t have to wait for them to fall off your credit report before rebuilding credit. In fact, waiting too long could actually damage your credit. You want a lengthy credit history showing responsible use and on-time payments.

There are restrictions on how soon you can file for bankruptcy again, so many credit card companies will be eager to secure a contract with you after your discharge. Many times, you may need to make a security deposit for the card or pay a steep annual fee.

However, as you make payments on time, your credit will improve. This will also improve the kind of credit card offers you receive. Using credit cards responsibly after bankruptcy is one way to quickly help your credit score go back up. After many months of paying for new lines of credit on time, you may be able to qualify for a mortgage.

Give yourself 2 years to rebuild your credit

If home ownership is a dream you simply can’t give up on, there is no reason to fear. Most lenders and Realtors agree that two years of time after a bankruptcy is probably sufficient. Provided that you do not incur substantial debt during that time and take steps to rebuild your credit, you could start looking for a mortgage as soon as 24 months after the date of your discharge.

In some cases, waiting longer is a good idea. After all, better credit means better rates and terms for your mortgage. Even a slight difference in the rate you receive can mean thousands of dollars difference in how much interest you pay over time. The most important takeaway is the fact that you will have the ability to buy a home even after filing bankruptcy.