How Long After Bankruptcy Can I Buy a House?

How long after bankruptcy can I buy a house? Well there is a question that people often want to know. They assume they will not be able to buy a home or get a mortgage after bankruptcy but that’s just not true.

The reality is most people that claim you can’t get a mortgage after bankruptcy, don’t know what they are talking about.

You see, people can actually buy a house right after a bankruptcy but if you need a new mortgage to do it, well that might take a little bit of time, but less than you’d assume.

No matter what people say, you can easily get a mortgage after bankruptcy.Click to Tweet

There is nothing stopping you from entering into an agreement to buy a home the day after your bankruptcy discharge using a couple of different methods. Immediately following bankruptcy you could enter into a deal to buy a home with a rent with option to buy or lease with option to buy. In this arrangement part of your monthly rent payment is applied towards the purchase price of the home. You’d be able to move in now, pay rent and build a downpayment and then get a mortgage in a couple of years.

If you decide to go the lease or rent with option to buy route make sure that the lease/rental agreement is recorded at the county court house so the landlord can’t go out and sell the house of get a new loan on the property while you are preparing to buy it.

You want to make sure your purchase position in the property is protected. You may also want to consult with a locally licensed real estate attorney about the best way to handle this in your area. A consultation will be money well spent.

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You might also want to suggest that the payments are sent to a third-party company to account for so there is no dispute later about how much you paid and what the credit is towards the purchase when it comes time to buy.

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But if you don’t want to go that route or you can’t find a willing seller or landlord to use that approach with, all is not lost.

You Can Buy a Home Following Bankruptcy

The key to getting ready to getting yourself qualified for a new mortgage is going to be a bit of effort, some saving, and time.

The first step to take is to look over your credit report after bankruptcy. Just follow the instructions below.

The second step is to rebuild your credit and turn it around. There is no need to pay for “credit repair” when all you really need to do is start getting good credit reported again.

Step Three – Start Saving

Once you tackled the credit report and started rebuilding your credit again you need to start saving all the money you can towards a downpayment and other new home owner expenses. The more cash you have on hand when you are ready to buy, the easier it will be to get approved for a mortgage.

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And when you are saving, don’t try to get tricky or clever. Just stash all your extra cash you can into a savings account or other investment account where it won’t lose money or get locked up, like in a CD>

How Long After Bankruptcy Can I Buy a House?

The answer is a couple of years if you follow the mortgage route and the guide I gave you above. After twenty months of following the plan I laid out where you review your credit report and start build credit immediately you should contact a local mortgage broker to get ready to get qualified for your new mortgage. A mortgage broker represents a number of lenders so you’ll have a greater opportunity to get approved and buy your house.

But when it comes time to buying there are two points to watch out for.

  1. Just because a lender will approve you for a mortgage, does not mean you can afford it. When you look at homes to buy, please consider a home that is priced low enough so you can easily afford it on about 75 percent or less of your income.
  2. Real estate agents make more money by selling you a more expensive home. Don’t let the agent steer you towards homes you can’t afford. Set an upper limit and stick to that line in the sand.
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The Reality

So you see the reality of being to buy a home after a bankruptcy is that despite all the rumors and whispers about not being able to get a mortgage for ten years, you actually will, and in a couple of years.

When you are ready to buy, I’d suggest you approach your mortgage broker and real estate agent and be open and honest about your bankruptcy in the past couple of years so they can do their best to help you finally buy the home you’ve been waiting for.

All is not lost just because you declared bankruptcy. Ironically, if it wasn’t for your bankruptcy filing you’d probably not be able to afford to save money and clean up your credit. Don’t worry, your consumer bankruptcy gave you a fresh start and a second chance, now go enjoy it wisely in your new home.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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