How to Purchase a Home After a Foreclosure

Filing for bankruptcy doesn't ruin your chances of home ownership.

Filing for bankruptcy doesn't ruin your chances of home ownership.

A bankruptcy filing stays on your credit report for 10 years. If you've experienced bankruptcy within the past 10 years, you might be under the incorrect assumption that you cannot get a mortgage loan to purchase a house. If you are able to prove that you've learned from your past financial mistakes, financial institutions may be willing to loan you the money to purchase a home.

Check your credit report to ensure the three reporting agencies have accurately recorded the outcome of your bankruptcy proceedings. Review the rest of the information on the credit report to make sure it contains no errors. If incorrect information appears on your credit report, contact the credit agency to have it corrected.

Apply for a secured or unsecured credit card to begin re-establishing your credit. A secured credit card gives you credit equal to an amount deposited with the issuing bank. For example, if you have $800 in an account with the issuing bank, the institution will grant you $800 worth of credit. An unsecured credit card is the traditional form of credit granted by companies such as Visa, Discover, MasterCard and American Express. To show financial institutions that you can be trusted with credit, use only a small portion of your available credit and avoid applying for too much credit in a short period of time.

Take out a small installment loan. This could be for reasons such as a car loan, student loan or a personal loan. Make your monthly payments on time each month to show creditors that you can be trusted to repay your debts.

Demonstrate -- over a period of two years -- a perfect use of credit to build your eligibility for an FHA loan. It might be possible to get a loan in a shorter period of time depending on your circumstances.

Save money for a down payment. A financial institution may offer you an interest rate higher than what it would offer a person without a history of bankruptcy. You can offset this extra amount added to your payment by having a large down payment to apply to your mortgage loan. Saving up a significant down payment can also show the lender that you have taken steps to improve your financial situation since filing for bankruptcy.

Maintain steady employment. A borrower typically needs to show a record of steady employment -- even without a history of bankruptcy on her record -- to get a mortgage loan. A financial institution will be more likely to lend you money if you can provide proof of continuous employment and sufficient income to make mortgage payments.


About the Author

Laura Jerpi has been working in marketing since 2007. She is an interactive copywriter who writes for Thought Leadership Publications, Ai InSite and South Source. Jerpi holds a Bachelor of Arts in communications from the University of Pittsburgh and a Master of Business Administration from Robert Morris University.

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