Going through a bankruptcy can do serious damage to your credit and, in turn, your ability to get a mortgage. It’s not impossible to get a mortgage after bankruptcy, but experts say you’ll fare better if you wait a bit before applying.
How long? For most loan programs, says Realtor.com, you should wait at least two years from the time your bankruptcy is discharged.
Why wait? Giving yourself some time between bankruptcy and a new mortgage allows you to begin repairing your credit score. You can take out small loans – personal loans or a car loan, for example – or use credit cards to prove to future lenders that you can make payments on time. You can also take this time to start saving for a down payment.
A bankruptcy stays on your credit report for seven to 10 years, Lending Tree reports, and its impact on your credit score lessens over time. Waiting two years (or more!) reduces the impact of the bankruptcy on your score. When your credit score rises, lenders will offer better interest rates.
But don’t take our word for it. You should always consult a financial counselor or credit counselor for advice and help formulating a plan to repair your credit.