For many consumers, the dream of homeownership may feel out of reach if they have experienced significant financial challenges that resulted in the need to file for bankruptcy protection. However, a Chapter 7 bankruptcy or a Chapter 13 bankruptcy need not prevent a person from fulfilling their dream of owning a home.
Consumers interested in applying for a mortgage after previously filing for bankruptcy should about some of the factors impacting their ability to be approved for a home loan.
Waiting periods after bankruptcy
Lending Tree explains that most mortgage programs require home buyers to wait a certain amount of time after receiving a dismissal or a discharge through their bankruptcy plan before applying for a home loan. The length of time that a person may need to wait could vary based on the type of bankruptcy plan they experienced as well as the type of mortgage they may apply for.
Some consumers may apply for a mortgage soon after a bankruptcy but by not waiting longer, they may be offered less desirable loan options. Lower interest rates and lower required down payments may be available should they decide to wait longer before applying.
Preparing to apply for a new mortgage
According to Bankrate, before applying for a mortgage after a bankruptcy, consumers should carefully check their credit reports and correct any errors found. They should be prepared to show that they have learned how to responsibly use credit since emerging from their bankruptcy. They may even wish to explain the circumstances that impacted their bankruptcy to highlight the differences in their current situations.