If you recently filed for bankruptcy, it may feel good to start from scratch. However, you may also be wondering when, if ever, you will get your life back.
One thing that may seem unattainable is to own a house in the future. With hard work and good decision-making, you may be able to own a home sooner than you think.
Timeline for home ownership
According to Realtor.com, although chapter 7 and chapter 13 bankruptcies both negatively affect your credit score, mortgage lenders typically respond better to people who filed chapter 13 because they are paying back their debts over time. However, this does not mean that someone who filed chapter 7 does not have a chance; it just may mean it will take a longer time before ownership can happen.
In general, the more time that passes since the date of debt discharge, the more favorably lenders look at potential buyers. However, it is possible for some people to get a loan as soon as one year after discharge, although most lenders require a minimum of two to four years.
Strategies to build credit and impress mortgage lenders
Lenders are more likely to consider a loan for people who filed bankruptcy due to an extenuating circumstance, such as a job loss or medical bill. If the filing occurred due to debt build up from overspending, you will need to be serious about making a budget and living within your means.
No lender will even consider loaning you money until you raise your credit score. According to U.S. News and World Report, paying bills in full and on time can help improve your credit score. It may also help to get a secured credit card, which also helps raise your score.
Make sure you review your credit reports regularly to ensure the dischargement of debt and to catch any errors so you can fix them right away. If you follow these strategies and are smart with your money, you may be a home owner before you know it.