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Guide to Buying a House After Bankruptcy

Written by Altitude Home Loans on . Posted in Home Buying.

Bankruptcy begets stress and makes you worry about certain financial decisions once you get back on your feet. However, many people can buy a house after bankruptcy. Altitude Home Loans’ mortgage lenders in Tucson, AZ, encourage you to look forward to the future by outlining when to explore home buying and how to go about it below. 

Bankruptcy Waiting Periods

There are two types of bankruptcy one might file for: Chapter 7 and Chapter 13. Each has a different timeline for when you can purchase a home and obtain a mortgage approval. Let’s look into what each type requires below. 

Chapter 7 Bankruptcy

Homeowners apply for Chapter 7 bankruptcy more frequently than Chapter 13. Once the court discharges your case, you must wait:

  • Four years to apply for conventional loans
  • Three years to get a USDA loan
  • Two years to obtain a VA or FHA loan

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is slightly less stringent than its counterpart. You can apply for an FHA or VA loan as soon as the court discharges your case. USDA loans only require a one-year wait, but conventional loan providers will maintain a four-year waiting period. 

Tips for Buying a House After Bankruptcy

Don’t view the waiting periods as punishments but as an opportunity to plan for buying a house after bankruptcy. After all, even first-time homebuyers with clean credit scores must plan for their purchase for years. The waiting period enables you to avoid the circumstances that caused you to go bankrupt in the first place. 

What can you do to plan for your future property purchase?

  1. Financial planning: Purchase a financial planning notebook and work with a financial advisor if you can afford it. Outline your recurring expenses, savings goals, and debt demands. Strategize how your household can balance the three. 
  2. Credit score management: Next, you need to establish a history of dependable credit payments. Use caution when paying with credit cards. A good practice is to never make credit card purchases unless you already have the money available in your bank. 
  3. Establishing savings: Property purchases require down payments. The higher your down payment, the better your chances of qualifying for a quality loan and establishing more affordable mortgage payments. 
  4. Partnering with mortgage brokers: Some brokers specifically work with clients with checkered credit pasts. They can connect you with lenders who are willing to cover the rest of the purchase. 
  5. Working with experienced real estate agents: A seasoned agent can also point you toward loan options that accommodate your situation. Research agencies working in the area you want to move once you build better credit and put money back. 

Bankruptcy might throw a wrench in your financial plans, but it isn’t the end of the world. You can rebuild your financial standing and enjoy homeownership again with careful planning. 

Start Your New Homeownership Journey With Altitude Home Loans

Looking for more strategies for buying a house after bankruptcy? Check out our financial planning advice. When you’re ready to buy in Tucson, Arizona, reach out to Altitude Home Loans at 520-500-1010.