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Buying a Home After Bankruptcy - Quicken Loans Zing Blog*This post was published in 2005. Bankruptcy guidelines have changed greatly since then. For more information, check out the government’s website here

The good news: Having a bankruptcy on your credit report does not mean you can’t buy a home. Believe it or not, those who have gone through bankruptcy are actually encouraged to find ways to build credit by taking on debt.

The bad news is that debt will be closely scrutinized, come in smaller amounts, and have higher interest rates because lenders will consider them to be higher-risk borrowers. But these downsides shouldn’t discourage those with poor credit history from investigating their home loan options. The responsible use of credit is the only way up from a bankruptcy filing.

How Bankruptcy Affects Your Credit Rating

Bankruptcy can provide relief to people in dire financial straits by releasing them from the obligation to repay their debts. It’s a drastic move for anyone because a bankruptcy will stay on a person’s credit rating for up to 10 years, effectively acting like a warning flag to anyone considering lending that person money or a line of credit.

In order to mitigate the risk of providing that person a loan, the lender will charge higher interest rates than they normally would. For instance, an auto loan that might ordinarily carry six percent interest could come with an interest rate of eight percent or higher. But, as time passes and small loans and credit card balances are paid off on time, the bankruptcy filing becomes less and less significant to a lender.

Rebuilding Good Credit After Bankruptcy

Establishing good credit after bankruptcy is essential. The following will help recent bankruptcy filers regain their financial strength:

  • Pay bills on time. This is the single best thing bankruptcy filers can do to build up their credit rating.
  • Acquire and use a secured or unsecured credit card. Just don’t charge any more than you can afford to pay off each month.
  • Read your credit report. Errors are possible, and keeping tabs on your progress will help you stay focused on the goal of rebuilding after bankruptcy.

When and How to Find a Home Loan

Understandably, mortgage companies want some form of reassurance that the borrower is on a safe and responsible financial track. Many lenders prefer to see three things when considering loaning money to someone following a bankruptcy:

  • A two-year stretch of on-time bill payments
  • A down payment
  • A steady income

The one non-negotiable item on the list is a reliable income. The other two – two spotless years of credit and a down payment – aren’t quite set in stone. Some lenders will be willing to provide a loan sooner than two years if there is evidence of responsible bill payment on a car or secured credit card plus reliable income.

Likewise, with a steady work history and a down payment (even a small one), it’s not impossible for someone just coming out of bankruptcy to secure 100-percent coverage on a home loan.

 

Finding a reputable lender willing to loan a home’s total value to someone just beginning the process of rebuilding their credit, and with an on-again off-again employment situation, is a tall order, and probably not a good idea for the would-be borrower. Post-bankruptcy borrowing should be undertaken at a slow pace and with an eye toward the future. With proof of responsible borrowing and spending, home ownership won’t be far off.

Have any questions? Talk to a Home Loan Expert today!

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This Post Has 316 Comments

  1. Don’t even know where to start…. My house was in a fire and due to the builders not completing the work right it lead into a nightmare.. My loan company citi Mortgage said they would work with me.. Understood what was happing but in the end they said nope and were going to foreclose on the property I tried to get a refi with them for 2 years as they led me down a road they knew was bs. I had to hire amer-fi to handle getting them to refi me. but in the end I still had to file for bankruptcy.. I did get the refi that I know I will never pay off. Because citi added all this extra money to it…I’m still in the home but I just don’t want to be in debt for this much money… I would love to get a new home but having trouble finding a company who will loan to someone that had this one their credit. Would love to find one …. can you help>>>> of course there is a lot more to this story just trying to give a real short version…..

  2. Hi,

    I had to file a chapter 7 and my wife filed a chapter 13 because we did not want to lose of vehicles. We filed in 2011. The 7 was discharger April 2011 and the 13 will be finish March 2015. We had a rented home that was foreclosed on and sold October 2013. Our scores has climb between 650-700. We have been renting and do not want to rent anymore. The rents has been between $1200 and $1600, and we would like to have that money going to our home. Combine income is over $10,000 a month and all bills to include house bills runs around $4000. This includes our rent of $1600. Wife has been with her job for 15 years and I for one year. We are wanting to buy a home. Have try in the past, but no luck. We will be using the wife VA Certificate. We do have $5000 for down payment. Is there a mortgage company that would give us a home loan? Thanks.

  3. I currently just finished my chapter 13 ive been at my job for 11yrs + i currently have 4children live in a two bedroom apt no space nor room for us im looking to buy my first home if any one could please help i was a very young girl when i establised credit..

  4. My Ch 7 bankruptcy discharge was Nov 2013, but I’d like to purchase a home this summer meaning 6 months shy of the two year minimum. Are there any lenders willing to work around this? We’ll have decent down payment and proof of employment of past 16 months.

  5. I will be discharged from my bankruptcy in 3 months my aunt and I are planning to by a home 1 year after my discharge. We will have like 15000 down but I don’t know where my credit score will be. She is also building hers but has no bankrupt but fixed income. I have steady income and will start rebuilding right after my discharge. Do you have any suggestions for a company with manufactored homes. We also have land with a worth of $35,553. Which we could use as down payment plus or 15,000.

  6. I filed for chapter 7 almost 2 years ago…my husband and I are trying are thinking about finally purchasing our first home..will my bankruptcy effect the amount of money we will be approved for?..

  7. I am in a very tricky situation. I have recently went through a bankruptcy, and had my home foreclosed on (just prior to filing), as the result of a divorce. I have recently re-married and had moved into my wife’s father’s house, since he was unable to care for himself. he has since passed, and he had so much debt against his estate that there was no way to save his home. The house has recently sold, and we have less than a month to move. Trouble is after all that has happened, my credit is horrible, and since the bankruptcy, we have no way of getting financed. I am well employed, my debt is nearly cleared, and I could afford payments. not sure how to get through this one.

  8. This is a little complicated. I own 2 condos in Fl. One rental, and one primary residence. The primary residence was bought 10 years ago for cash, $60,000.00 and remains free and clear. The rental has steadily produced $550.00 month for 10 years. I became ill and required extra help. I gave my daughter quit claim deed to primary residence in return for her help. My adult son was also living with me and required a lot of care (congestive heart failure). He died suddenly, leaving me with a lot of debt. I filed for bankruptcy. I did not declare the debt-free condo as primary because I thought my daughter had title. The Trustee went after my primary residence, disregarding that it was the only home I had. He agreed to settle for $5,000.00 payout if I was to keep my home. I managed to pay him half. The remainder is due by Feb. 1, 2015 or my home will be sold on the courthouse steps. I need to pay him, plus to get some vital home repairs done quickly. I would seek a loan or mortgage for $10,000. on a 3/2 condo worth $40,000. to $60,000. All my debts are paid on time every month and always have been . I am a senior citizen on a fixed income. I would seek a fixed rate 3 1/2-4% mortgage-15 years- anticipating that it will be paid off sooner. There is a sense of urgency about this because I only have until Feb. 1st. Is this something that quicken loans can help me with? Many thanks and happy holidays!.

    1. Hi Sue! Thanks for reaching out. I’ve passed your comment on to our team of licensed mortgage professionals and they’re looking into it and will reach out to you soon.

  9. Is it set in stone that you have to wait 2 years after bankruptcy? we filed chapter 13 and made our payments on time even paying over, I was hurt in a oilfield accident and was down but know Im a consultant and make great money and have for the last 4 years on the same job. Im a vet so I can get a VA loan and have a really good down payment but only been out of bankruptcy for a little over a year. we do have a credit card and a car loan already to help start building up our credit.

    1. Hi Shawn! I’ve passed your comment on to our licensed mortgage professionals who will be reaching out to you shortly.

  10. I have had the same problem with an unfortunate bankruptcy. I have a great job and currently paying $1250 a month on a house that should be costing me $500-$600 a month financed. I also need to get my home financed and on the right path. I would be interested in how you could help?

  11. My name is on the title but not the mortgage of a home my husband financed that is now going into foreclosure. Can I purchase a home in my name? My bankruptcy was discharged in 2009 and the house was included.

    1. Hi Jan! Thanks for reaching out. I’ve passed your comment onto one of our licensed mortgage experts who will be reaching out to you shortly.

  12. Hello,
    My husband filed BK and it just recently closed a few months back. We feel like we are stuck in a giant rut now and have tons of questions about what we need to do to get on track to buy a home. Please have someone contact me. It would be greatly appreciated.

  13. My Chapter 7 was discharged 12-21-13. I tried to start a flipping business. The very first day of redoing my little landmine house, the housing crashed. My house plummeted. I couldn’t make enough to pay bills. Took 2 years to sell at a loss. I tried for a long time and after discussing with my brother decided to apply for BR and lost my home. Before I had excellent credit and am back to getting it back. My brother agreed to loan me money to buy home. He gave me the money, I bought the home but haven’t signed his mortgage yet because his wife is stipulating who can be in my home or who can work on it with a mortgage provision. I need to pay him off, can you help or can anyone? Thanks, Deb

    1. Hi Deborah,

      I’ve forwarded your information to our Home Loan Experts who will be in touch with you soon.

      Have a great day!

  14. Hi! My husband and I were discharged from chapter 7 bank in March 2013. I know we have to wait 24 months before getting a home loan. I was wondering if we can find out how much we can get financed for a couple months before that 2 year marker? Also does it make it any better or worse if we have never had a home loan before? Thank you for your time.

  15. I want to know if i could get qualified for the back to work program/FHA without waiting a year. I was recently discharged from bankruptcy march 20, 2014. I have two secured cards that i am using. I charge a little bit then pay the balance off before the month is over. I have a house in mind and 4,000 to put down. I make 24,000 a year. I have a new job that i had been with for 10 months. Prior to that i worked for the same employer for 12 years. The reason for my bankruptcy was i was the subprime lending. I was very young when i got my first house and i didint know what to do so i relied on a broker who sent me to this mortgage company. They gave me a home loan on my credit alone which was 790. Then when we sat down to do the writing they told me what the payments was going to be which was 1260. We was shocked because we thought they was going to be 800-900 a month. But we got it anyway and the guy told me, “you will be ok just refiance after 2-years”. After 2-years of on time payments i was looking to finance before our mortgage adjusted and one of the quicken loan experts told me that i didnt make enough to be sitting in that home. I was denied by others banks. So our home was foreclosed back in 2008. When we lost our home the rest of the bills followed because my husband at the time couldnt get a stable job. We later separated and divorce. My job cut my hours so much that i wasnt make enough to support my family. All of the creditor started suing me for the balance. I was paying them on time. Then another decided to sue and it was becoming too much so i filed bankruptcy. I later quit and got an another job that pays well but i have kids and i need a home for us. So i wanted to know if i can get a mortgage for 77,000 i have 4,000 down but i can put 7,000.

  16. My husband has had 2 stokes open heart surgery kid hey failure been buying house contract for deed for two years need financing had discharged bankruptcy 3 months ago help

  17. My wife and I has filed for bankruptcy of 2010 and has been discharged the same year. The next year we moved to the Philippines and after 4 years decided to move back to the US. We are getting ready for our move and my question is do we have any chance of getting a loan for a house? While in the Philippines , I worked as a sub-contractor for the same company I have been working for the last 17 years. Moving back I will be working full time gain with the company. We don’t have any savings because we built a house here in the Philippines. I don’t know if life insurance would qualify as an asset because we still manage to pay it on time even if we are away. We didn’t have any debts when we left the US though we were slap with taxes when we withdrawed my 401k. We managed to pay off our state taxes and we are still paying our federal taxes. Waiting for your reply.

  18. Hello me and my wife has been discharged from are chapter 7 since July 2013 in Nov 2013 we got a car thru are local bank and credit cards we only been late one time on the credit card but we have paid them off..we lost are rental home in a fire we have no insurance on are property and by the grace of God and the community we have money in a saving and cloths on are back..we tried to get are local bank to help with a home loan but they want us to wait until we paid at less a year on the car then come talk to them were not renting we’re staying with my mother could you give us some advice of what should we do ?

  19. My wife and I were discharged in Dec.13. We managed to keep 2 vehicles during the process. We have been making our landlord rich for the last 6 years. We have started the rebuilding stage and we both work full time and have been on our jobs for a long period. We have 15k in 401k to use as down pmt. Is it possible to get financed sooner than 2 years. We have found a property that is listed for 71K on 2 acres and a 4 bdrm house. Any input is welcome.

  20. We were discharged on a chapter 7 in Nov 2013. I am very interested in being pushed the right direction and stop pissing away my money on rent with so many empty houses in foreclosure status you would think they would make it easier to purchase for someone with little to no debt now. I have a very small down payment and am looking for a home loan around 145k to keep the payments reasonable. Would prefer some bare land we can put a newer manufactured home on. Please help.. desperate to own a home

    1. Hi Kimberly!

      I’ve forwarded your information to our Home Loan Experts who should be in touch with you soon.

      Thanks for reading!

  21. My husband and I filed chapter 7 bankruptcy that was finalized on Jan. 5, 2012. We have paid all of our bills on time and even paid off our truck during our bankruptcy. My husband lost both of his jobs leaving me the primary bread winner and we just could make it on my salary. He was unemployed for 8 months and by then it was to late to salvage our home. We were pushed into a corner by the credit agencies and our only alternative was to file bankruptcy. It absolutely killed me, because I should be able to pay my bills. I was told after 2 years we would be able to purchase a mobile home, but now no one will work with us. They are now saying that it has to be 3 years before we can qualify. We have been renting a home for the last 4+ years and have managed to pay our land off while doing so through a family member, which doesn’t appear on our credit. We are eager to move onto our property. We do not wish to use our land as collateral as we are only living in a mobile home until our house is complete and then we will sell the home. I will welcome any advice.

  22. My husband and I filed Chapter 7 and were discharged end of June, 2013. All of our income was “exempt” income in bankruptcy. Our home ($462,000 purchase price) was surrendered in it. It was suppose to have been our place to live through our retirement years. We had paid cash for over $40,000 for deck/cage/additional upgrades after closing plus a lot of $$ in repairs not covered by builder in 2nd year of ownership after closing. An investor took the home via “Quit Claim” in Oct. 2013 with no disclosures needed or wanted and filed the Quit Claim with the county. The bank looks to foreclose on note in June, 2014. We are retired with annual income over $100,000, 2 car payments kept through bankruptcy (never late) (one car will be sold this fall) and have one credit card paid off with each billing (never late). Our credit prior to bankruptcy was in upper 700’s-800’s. Current credit scores just under 700; hoping to have them over 700 by end of year 2014.The cause of the bankruptcy was due to the 2 yr. old home we had that had severe electrical problems, burning out computers and appliances and lights wouldn’t stay on but builder refused to do anything about electrical. We were preparing to have electrical redone when we received letter (which we have) that the product used in tying our roof to foundation and tying other parts of structure together was defective. We were told by the company who supplied the product to the builder the house not safe to live in during storms with high winds (located in Florida). The builder was notified about the delivery of the defective product 2 months before starting on our house. Builder refused to talk with us. Our realtor told us we would never be able to sell or rent the house and referred us to an attorney. The attorney told us a law suit against the builder would take years and lots of $$ and he recommended it was best to get out of house through bankruptcy as living in it was not an option and continued payments on house we couldn’t live in not an option. He got us through with surrender of the house. In all our years of excellent credit, we never dreamed of being in such a situation. We are renting and throwing our money away and would love to qualify for FHA loan end of this year if possible with min. down. We are trying to learn if there is any possibility of this considering the situation leading to the bankruptcy? Thanking you for any information that would help us in decisions about renewal period of our lease end of May.

    1. Hi Carol!

      I’ve forwarded your information and questions to our Home Loan Experts who should be in touch with you soon.

      Have a great week!

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