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5 Steps to Buying a Home After Bankruptcy

If you’re one of the millions of Americans who have declared bankruptcy, financial recovery can seem like a pipe dream. But don’t give up. According to a study by the Consumer Financial Protection Bureau, people’s credit scores increased steadily after filing for bankruptcy. While any credit improvement is good news, is it enough to offer a chance at homeownership? Here’s what you need to know about buying a house after bankruptcy.

5 Steps to Buying a House After Bankruptcy

The good news is that you can still buy a home after bankruptcy. However, your journey may require a bit more effort, organization, and time than the average prospective homeowner. You’ll need to wait until a judge discharges your bankruptcy before you can get a loan, but beyond that it largely depends on how quickly you can get your finances in order.

Bankruptcy isn’t something anyone wants, but for people in dire financial trouble, it can be the only way to wipe out liabilities and get a fresh start. Bankruptcy can reduce financial stress, letting you focus on making positive financial decisions for your future. If you’re ready to move forward and make your dream of owning a home a reality, start working on these strategies today.

Note: Bankruptcy is a complicated legal matter. Please consult with a bankruptcy lawyer about your financial options before and after taking the step to file for bankruptcy.

Reorganize Your Finances

Once some of your debts are discharged in bankruptcy, you’ll be on the road to recovery. But don’t rush out to get a home just yet—wait for the dust to settle and get your finances in order.

Examine Your Debts and Credit Report

Take stock of where you are financially now that a few of your debts have been discharged. Next, get a copy of your credit report. If you have a copy of your report prior to filing for bankruptcy, use it to create a before-and-after picture of your finances. Make it a regular practice to review your credit so you can proactively watch for any mistakes and get them corrected. It’s also encouraging to see the progress you’re making over time.

Put a Budget Together

Take control of your monthly household budget, paying every one of your bills on time, every time. Figure out your monthly income and expenses, so you know what you have room for—and what you don’t. Anticipate upcoming annual costs, like taxes or car registration, and put money aside so that you aren’t scrambling to scrape up the funds when these costs are due.

Consider a Credit Card

You can also start building your credit by using a credit card to pay some of your monthly bills. If you choose to do this, make sure you use the credit card like cash and pay it off every month. If you keep a close eye on your budget, pay all bills on time and monitor your credit report, you’ll start to see positive change that will get you closer to buying a house.

More on credit.com

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