First and foremost, it’s important to know that buying a house after bankruptcy is possible. The second most important thing for you to understand is that although it’s 100% possible, your process for buying a home will be different than that of a traditional home buyer.

A number of different mortgage options are available for people who have declared bankruptcy, but the two most important factors that determine your options are: 1) how long ago it was that you declared bankruptcy, and 2) how long you have been re-establishing your credit.

One of the first things to do between declaring bankruptcy and deciding to buy a home is re-establish your credit. The best way to do this is to get into a strict habit of paying your bills on time, and pay off all of your debt. Once this habit becomes second nature, you can begin saving money for your down payment.

Here are three things you need to know when buying a house after bankruptcy:

1. Plan for a larger down payment

Aiming for a down payment of 20% – 25% will give you significantly better mortgage options when it comes time to buy a house. Of course it may take you a bit more self-discipline to save for this larger down payment, but it puts you in a much better financial situation.

2. Expect a higher interest rates

Especially if you are looking at an untraditional mortgage or subprime lending, your interest rate may be a bit higher than those offered to people with better credit ratings. In most cases, it can be 1% higher than mainstream rates.

3. Your home buying process will take longer

Since a full appraisal is required, expect that your offer to purchase will take longer than normal. In this case, it would be wise to include a window of five business days to have the appraisal completed during your offer to purchase.

I understand that buying a home after bankruptcy can be both confusing and intimidating, which is why I like to educate my clients with all the information they need. If you’ve declared bankruptcy in the past and you are now looking to purchase a home, I’d love to help you! Please contact me to start discussing your home buying plan.