Wednesday, June 19, 2024

Buying a House After Bankruptcy
by Scott Bilker
Scott Bilker is the author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart. He's also the founder of DebtSmart.com. More about and DebtSmart can be found in the online media kit.

Scott Bilker

Scott,
How hard is it to buy a house after filing for chapter seven bankruptcy? How long will it take to get a house? What are some of the things I need to do before even going to try to buy a house?
--Rachel


Answer
Rachel,
First let me say that bankruptcy is certainly not the end of your credit life. I know many people that have filed bankruptcy and went on to rebuild their credit very quickly--and buy a house!

Bankruptcy will show up on your credit report for 10 years. That means that every mortgage lender will certainly see that fact when evaluating your mortgage application.

Although it may be difficult to find a bank to give you a mortgage it's certainly not impossible. Banks want to make money and you may find one that's willing to take the risk. You can increase your chances by coming into the deal with as much cash as possible. The more money you can use as a down payment, the less risk for the bank. There is a level where they'll lend you the money because the loan is secured by the house and the house is worth more than the mortgage.

In summary, cash will solve this problem, for sure. However long it takes to gather that cash is how long it will take to get the house. I would shoot for at least 20% down.

I'm guessing that you don't have that kind of money or you wouldn't have filed for Chapter 7 in the first place but now that you have a clean slate it's time to start building your wealth, saving, and getting ready for that house.

Start thinking about how you can make money in your spare time, selling on line at eBay, doing freelance work, or starting your own business.

Good luck and please let me know what happens.

Scott


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