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A bankruptcy in the recent past does not close the door to first time home buyers. In fact, using the law to get a handle on unmanageable finances through the bankruptcy courts may help put homeownership in sight. If you have high levels of qualifying debt that you have little chance of paying off in a reasonable period, a bankruptcy may give you the relief you need. The current bankruptcy law is more stringent about which chapter for which people qualify, but if the court discharges the debt, first time home buyers can often buy a home within three or four years after the case closes.
Open a secured line of credit. It's not likely a credit card company or bank will give you an unsecured credit line for a few years. Choose a company that reports your activity to the credit bureaus and put several hundred dollars into an account as a deposit. Each time you use the card and make payments on time, your credit improves.
Make other payments on time, like student loans or car payments. These payments help establish that you're a good credit risk.
Check your credit score three months or more after the bankruptcy to verify that the accounts have all been discharged. If some that you listed on your bankruptcy show they are still open, contact your legal representative who can help you clear the problem up. If you handled the bankruptcy action yourself, contact the company reporting the debt.
Start to save considerable money to use as a down payment for buying a home just after your bankruptcy discharge. The interest rate you'll pay on a mortgage will be higher than if you had good credit. A large down payment helps lower the monthly payment on the home.
Keep all your bankruptcy papers. The lender may want to review them, along with other legal documentation, to approve your loan.
Contact a Realtor or several lenders to get pre-approved for a mortgage. Mortgage pre-approval speeds the buying process when buying a home and gives you an advantage with sellers, since they know you're eligible for a mortgage. A trusted mortgage consultant can also help you get your credit and finances on track for you.
Bankruptcy doesn't mean the end of the dreams of first time home buyers to own their own property. Mortgage lenders know that financial problems can be transitory and that bankruptcy is legal solution to overwhelming financial problems. Again, you're probably looking at a 3-to-4 year wait once you're discharged from bankruptcy before you can once again buy a home.
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