Dealing With A Past Bankrupcy You Can Still Buy A Home Sooner Than You Might Think

Dated: 04/25/2018

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In the past 6 years, more than 5 million Americans have filed for bankruptcy. And while many people believe that filing for bankruptcy causes long-term financial ruin—and will keep them from ever being able to purchase a home—it turns out that might not be the case.

According to The Cost of Bankruptcy, a recent study from Lending Tree, within a year, 43% of people with a bankruptcy on their record are able to get their credit score to 640 or higher, which is the credit level typically necessary to qualify for a mortgage. Within two years of filing bankruptcy, that number jumps to 65% and at five years, 75% of people who filed bankruptcy have a FICO score of 640 or above.

Now, if you have a bankruptcy on file and a credit score on the lower end of the qualifying spectrum, you're likely to pay higher interest rates. But if you can get your score up, your bankruptcy is unlikely to have a major impact on your loan. According to the study, people with a credit score between 720 and 739 who applied for a mortgage three years after filing for bankruptcy were offered similar interest rates to those without a bankruptcy on their credit file.

 

The Takeaway

If you have a bankruptcy on your credit file, buying a home is still possible. Focus on raising your credit score and you might be able to make your dream of homeownership a reality sooner than you ever thought possible.


Related Articles:
6 Mortgage Questions A FirstTime Home Buyer May Be Embarrassed To Ask

How Credit Scores Affect Mortgage Rates

How to Buy A House (Even if You Have a Less-Than-Perfect Credit Score)

Misconceptions About Buying A Home Are Blocking Eligible Buyers From Becoming Homeowners


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