Bankruptcy is a legal process that can have a drastic impact on different aspects of your financial life, including purchasing a new home. However, with the right strategy, it is possible to buy a new house even with a bankruptcy on your record. Here are a few tips you must keep in mind if you plan to buy a house after bankruptcy.
1. Discharge Your Bankruptcy
One of the first things you must do is to discharge your bankruptcy. This will release you from liability for specific debt types and stop creditors from taking any sort of action against you on debts that have been discharged (forgiven after the bankruptcy).
It also prohibits the creditors from communicating with you through any means including phone calls, letters, etc. The time it takes for the bankruptcy discharge depends on the type of bankruptcy you filed for. If you’ve filed for Chapter 7, your chapter 7 lawyer would be able to guide you more on this.
2. Organize/Rebuild Your Credit
Before you go ahead with the conveyancing process to buy your new home, you’ll need to start repairing your credit history. This is important because bankruptcy can wreak havoc on your credit and the damage remains on your credit history. This can hurt your record when you apply for a home mortgage loan.
Organizing and examining your credit report, along with contacting your credit agency in case of any errors is necessary for the recovery process. So don’t wait when it comes to building your credit history after bankruptcy. The better your credit is, the easier it will be to buy a home.
3. Be Patient
Buying a house after bankruptcy can be a frustrating process, so it’s important to be patient. You must wait and be proactive about improving your financial situation. You may come across non-banking lenders who would be willing to offer you a loan even after bankruptcy. However, this kind of mortgage loan may not be a safe and ideal option for you. So be aware of what you’re getting yourself into.
To be on the safe side, take some time to build your credit and file for a mortgage loan following the legal process. This will not only increase your chances of securing a mortgage with better terms but also show your lender that you are committed to responsible financial management.
4. Don’t Take On Unsecured Debt
Lastly, when it comes to rebuilding your credit score, it is recommended not to take on any unsecured debt. Not only does it not look good on your report, but credit cards and personal loans can come at high-interest rates. Hence, it is risky, especially when you are trying to rebuild your credit score.
Moreover, having too much unsecured debt can make it more complicated to receive a home mortgage loan from the lender. Instead, try to focus on paying off any existing debts as the chances of receiving a loan with a clean slate are more than securing loans with pre-existing ones.