Buying a Home After Bankruptcy

Imagine No Debt
618.235.9800

One of the most common questions asked by people who are considering bankruptcy is if it will be possible to purchase a home while the bankruptcy remains on their credit reports. The answer to this question is not simple, but it is possible to buy a home after filing for bankruptcy. In the right circumstances, it may be possible to buy a home directly after a bankruptcy discharge. However, it usually takes several months to balance out an individual’s credit history. The most efficient and reliable way for someone to find out if he or she can buy a house, or find out what must be done in order to do so, is to hire an experienced bankruptcy attorney. A bankruptcy lawyer will take care of the process of filing bankruptcy and will provide support or advice about what to do afterward.

Bankruptcy and Credit Scores
The first thing an experienced Illinois bankruptcy lawyer will tell a client who asks about buying a home is that it must wait until after the proceedings have ended. First, it is nearly impossible to find a lender to approve a loan for someone in bankruptcy proceedings. Secondly, trustees and bankruptcy judges do not approve of anyone making large purchases while proceedings are underway.

How long it will take after bankruptcy proceedings have ended depends on a person’s individual credit scores. Most people suffer a serious drop in their credit rating after having filed bankruptcy. To make matters worse, nearly everyone who files bankruptcy has experienced a decline in their credit rating just prior to filing. However, bankruptcy does have some positive attributes:

  • Filing for bankruptcy makes individuals aware that they need to keep control of their finances and work inside a budget.
  • Bankruptcy removes all doubts about debts and status with creditors.
  • Bankruptcy shows that a person is making an effort to correct an undesirable financial situation.

It is important to begin reestablishing credit immediately after a bankruptcy discharge. Building credit can take anywhere from several months to several years, but most people tend to rebuild their credit in 18 to 24 months.

Rebuilding Credit after Bankruptcy
Immediately after bankruptcy proceedings are complete, it is possible to work on rebuilding credit ratings. The goal of rebuilding credit to buy a home is to get mortgage lenders to believe that the past financial troubles of the applicant have been permanently solved. An experienced bankruptcy attorney can help to get this task accomplished quickly and efficiently.

The first step in rebuilding credit is to make sure all credit reports are accurate. Credit reports can be ordered once per year at no cost. If any mistakes appear on the report, they must be corrected with the creditors and the credit reporting agencies. Once all corrections have been made, it is possible to begin adding positive entries to the reports.

To rebuild credit, it is necessary to incur debt. This should be done slowly and carefully. Using credit cards and paying off the balance each month will help to build positive credit. All bills should be paid before they are due. A small personal loan or an auto loan may also help to build credit but only if the payments are affordable. A bankruptcy lawyer will be able to provide advice specific to each of his or her clients.

Applying for the Home Loan
In many cases, a person who has filed bankruptcy will qualify for a home loan carrying favorable terms within two years after discharge. Federal Housing Authority (FHA) loans require a minimum of two years. If a home loan is approved, but the interest rate is high, most bankruptcy attorneys will recommend the further rebuilding of credit before buying a home.

Schedule FREE Consultation



Phone    - -



 

Office Locations

O'Fallon

1 Eagle Center, Suite #3A
O'Fallon, IL 62269
(618) 235-9800
map icon

Granite City

1600 Pontoon Road, Suite B
Granite City, IL 62040
(618) 235-9800
map icon

Salem

2721 S. Broadway (Rt. 37 South)
Salem, IL 62881
(618) 548-0083
map icon

Mt. Vernon

4106 Broadway
Mt. Vernon, IL 62864
(618) 548-0083
map icon

Effingham

400 N. Keller Drive, Suite F
Effingham, IL 62401
(217) 342-0333
map icon