Usually, home loans and bankruptcy are two terms that don't go hand in hand. A lot of people are of the opinion that once they go through bankruptcy, all avenues of home ownership are forever closed to them. This is not their fault as there is a lot of misinformation about home loan eligibility after a bankruptcy. What every person who has gone through a bankruptcy must know, is that though they might have to wait for a while to get the keys to their new home, it is still completely possible to obtain a home loan.
The most important fact to keep in mind is that, a person who has gone through a bankruptcy has to undergo a mandatory wait of at least two years from the filing of bankruptcy and discharging of debts. Unfortunately, some lenders will not even consider an application for a home loan, from an individual with a history of bankruptcy for at least four years from the time of the discharge of debts. A lot of people who go through a bankruptcy are in a hurry to get back on their feet, and therefore make buying a new home a top priority morale-boosting activity. There is no choice but to slow down a bit as obtaining a conventional loan will take at least four years.
Owning a home should be a goal to work towards rather than something to concentrate on after an individual files for bankruptcy. What is more important is to concentrate on getting one's finances and credit score back on track. The priority should be given to remaining debts which should be paid off as soon as possible and efforts must be made to start building good credit. A good tactic to follow is to get a couple of credit cards and use them regularly, and to make sure to pay them off on time. A good standing with one creditor will prove to other creditors, like home loan lenders, the worthiness of an individual for their financial help.
It might be hard to focus on other things when one's desperate desire is to own a home again. But concentrating on getting the credit back on track and keeping it as perfect as possible will make overcoming bankruptcy much easier a few years down the line. A bankruptcy will stay on an individual's credit report for seven to ten years but will stop having a significant effect after two years or so. One thing to remember is to make sure that all accounts that were part of the bankruptcy have been discharged.
A combination of significant cash reserves and a high income can also help offset credit risk. The lower the debt to income ratio, the better score one gets with a lender. The amount for which the loan is to be taken also has an influence. Finally, it is important to remember that not all lenders will treat individuals with a bankruptcy history the same way. Sub prime lenders are a better option as they target people with adverse credit and also offer more options than the traditional lenders.
