Some people put off bankruptcy in the hope that they will be able to recover financially. They do this because they have heard myths about bankruptcy such as the idea that they won’t be able to own a home in the future.
While there is some truth to the idea that it is harder to buy a home after a bankruptcy, the bankruptcy itself won’t affect you forever. In fact, it may be possible to buy a home after just one or two years have passed since your bankruptcy.
How soon can you buy a house after you go bankrupt?
You can buy a home through several different lenders, so it’s important to look at various loans before you seek one out. Usually, after a bankruptcy you will need to wait at least two years before taking out a home loan.
Some of the loans you may be able to take out soon after a personal bankruptcy include:
- FHA and VA loans, which are usually available two years following a Chapter 7 bankruptcy discharge
- USDA loans, which are normally available three years after the discharge of a Chapter 7 bankruptcy
If you have the option of taking a Chapter 13 bankruptcy instead of Chapter 7, you can reduce your wait time for a home loan to a year. However, the Chapter 13 bankruptcy itself may take longer, so a Chapter 7 bankruptcy may help resolve your debts sooner and help you get into a position where you can buy a home much more quickly.
How high does your credit score need to be before you can buy a house?
Most lenders, regardless of who they are, do require you to have a credit score over 500 to take out a loan. The higher your credit score is, the less you’ll pay in interest in most cases. For FHA loans, for example, you will need to have a minimum score of 500. VA loans don’t require a minimum score, but it’s better to have one over 620. Keep this in mind as you start to browse for a loan that will work for you.