How to Rebuild Credit After Bankruptcy To Obtain a Mortgage

rebuild credit after bankruptcyAfter filing for bankruptcy, you’re likely eager to rebuild your credit and get back to life as normal. It does take time though to rebuild your credit and qualify for a new mortgage. Individuals who lost their homes as part of the bankruptcy filing are the most eager to find a way to qualify for a mortgage once again. At the time of filing, your Arizona bankruptcy attorney can give you tips on how to best rebuild your credit.

One of the most common questions we get when working with clients who are filing for bankruptcy is if they’ll ever own a home again. And yes, you certainly can own a home again with proper planning and responsible financial decisions. Homeownership is a matter of pride and comfort for you and your family.

You can rebuild your credit to take out a loan for a car again or a mortgage. Here are the important steps you should take to rebuild your credit to prepare for applying for a mortgage.

Click here for steps to repair your credit after bankruptcy.

Restoring your credit after declaring bankruptcy

Once your bankruptcy filing is complete, you can begin working to rebuild your credit. Here are the important steps you should take.

  1. Make a budget. You need to stay on top of your finances now that you have a fresh start. A budget will help you be accountable in your spending and avoid getting deep into debt again. If building a budget is not your strong suit, ask a friend or relative for help. If you can afford it, hire a financial advisor who can help you prepare for the future, such as retirement or a child’s college education.
  2. Put money into your savings. When the unexpected happens, you need to have savings to support you to avoid deep debt. The loss of a job or a health issue that requires many medical bills could leave you strapped and struggling once again. While times are good, plan ahead and start putting money into your savings.
  3. Monitor your credit score. Many credit cards now offer a monthly credit score report. Watch that report to see what factors are affecting your credit score. The more you know about your financial situation, the better you can make adjustments to your spending to improve that score as quickly as possible. After filing for bankruptcy, you likely have a credit score somewhere in the 500s. That’s pretty low as far as a mortgage loan is concerned so you’ll need to increase that number before applying for a new loan. Paying your bills on time and using minimal amounts of your allowable credit on your credit card can help.

Applying for a mortgage after bankruptcy in Arizona

When your credit score is poor or you’re only a couple of years removed from declaring bankruptcy, the bank might require that you put 25 percent down to receive a home loan. If you wait a little bit longer, you might only have to put 20 percent down to get a mortgage.

As a general rule though, if you filed for Chapter 7 bankruptcy, you’ll need to wait four years before you can get a conventional mortgage loan. If you filed for Chapter 13 bankruptcy, you’ll need to wait two years from the discharge date and four years from the dismissal date before applying for a mortgage loan.

If you’re at the beginning of your bankruptcy journey and need an attorney to help you file, contact us. We’re experienced in helping Arizona residents file for bankruptcy to restart their financial journey. While it can seem intimidating at first, bankruptcy can be the best option for those who have serious financial woes and not enough income to cover their debts.

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