Although there are a lot of benefits you can experience from filing Chapter 7 bankruptcy, there are some consequences too. One of the consequences is the effects it can have on your credit. Chapter 7 bankruptcy will appear on your credit report for 10 years after you file, and there is nothing you can do to speed this up. While this may seem bad, you should realize you will not have to wait 10 years to qualify for a mortgage. Here are several things to understand about bankruptcy and your ability to get a mortgage loan.
You Will Probably Have To Wait For Two Years
In most cases, it will be almost impossible to qualify for a mortgage loan if you apply within two years of filing. If you can wait for two years after you file, you will improve your chances of qualifying for the loan, and this will give you time to save up some money for a down payment.
The nice part about Chapter 7 is that it helps people free up their money. If the bankruptcy discharged your debts, you probably have less to pay now, which means you may have more money to save. If you can work on saving money each month for the next two years, you could have a great amount to use for your down payment when you buy a house.
It Will Depend More On Your Credit Score
Waiting for two years is an important step in the process, but there is another step that is just as important. During the two-year period after you file, you should be spending time working on your credit. Your credit score will impact your ability to get a loan after the two-year period is over. Bankruptcy decreases your score, but there are many ways to increase it.
One way is to fight things on your report that are not accurate. For example, if there were debts discharged through your bankruptcy that are listed on your report as unpaid debts, fight them. Getting these items removed or marked "paid" could increase your score.
Getting a secured credit card is another way to increase your score, and staying debt-free is also important.
Getting a mortgage loan after bankruptcy might be harder to do, but it is not impossible. If you filed for bankruptcy several years ago and are ready to buy a house, contact a financial institution like Weyco Community Credit Union to find out if you are eligible for a loan.