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FAQ: How Do You Buy a Home After Bankruptcy?

Buying a home after bankruptcy isn’t impossible, but it takes patience and time. Here’s all you need to know about the process.

California has the highest number of bankruptcy filings in the US! If you’re in a position where you also have to make this painful decision, you may be wondering how it’ll affect your ability to obtain a house loan or buy a house.

The truth is, it’s possible to buy a house after bankruptcy, but it requires patience, robust financial planning, and a strong credit report. Filing for bankruptcy is an overwhelming process. You have to start building your credit score as soon as you clear your debts, making sure all payments are made duly and in full every month.

Read on as we discuss various aspects of buying a house after bankruptcy.  

The Effects of Bankruptcy on Your Ability to Buy a House

You have to understand the effects of different types of bankruptcies on your ability to buy a residential property before taking any steps:

Chapter 7 Bankruptcy

You are no longer obligated to pay discharged debt if you file a chapter 7 bankruptcy. Here, the critical term is nonexempt assets—and a chapter 7 bankruptcy filer is unlikely to own a property that falls in this category.

A for sale signage outside a house

Chapter 13 Bankruptcy

In a chapter 13 bankruptcy, your attorney creates a repayment plan that modifies your secured debts and only pays attention to your unsecured debts. Since the court clears you with a bankruptcy discharge notice after you’re debt-free, a chapter 13 filing is the best option if buying a house is a core part of your future plan.

Keep Checking Your Credit Score

A bankruptcy can stay on your credit score for over ten years? Therefore, it’s paramount that you start rebuilding and reexamining your credit report right after.

You can speed up the process of acquiring a mortgage loan or buying a house by ensuring an accurate credit report. Stagger your requests by getting credit reports quarterly instead of yearly, ensuring early detection and clearance of possible debts and mistaken disputes.

Tips to Rebuild Your Credit after Bankruptcy

Qualifying for buying a house or securing a mortgage loan requires your undivided attention so you can rebuild your credit. Here are some mistakes you should look out for when assessing your credit report:

  • Spelling mistakes in your name, address, contact, and social security number
  • Incorrect account information that indicates unidentified theft
  • Outdated personal and credit info
  • Unwanted information from your former spouse
  • Accounts that you didn’t include in the bankruptcy filing

When’s the Right Time to Buy a House After Bankruptcy?

To close a mortgage deal on good terms and a profitable interest rate, it’s a good idea to wait for at least two years following your bankruptcy proceeding. Installments require scheduled, regular payments that include a chunk of principle and interest amount for the specified period.

Hence, it goes without saying that rebuilding your credit is the cornerstone of buying a home after bankruptcy. Before making a decision, ensure that it won’t risk your credit and that you’ll be able to service the debt.

Experienced Home Appraisers in Lodi, CA

If you’ve finally found the perfect home after bankruptcy, hire house appraiser Lodi to help you buy it at the best market price. At Torlai Appraisal Services, our certified residential appraiser are licensed by the California Bureau of Real Estate Appraisers to evaluate your property in Northern California.

Learn more about our real estate appraisal services or contact us to get started.

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