One of the most common questions we hear is, “Can I buy a house or car after filing for bankruptcy?” The short answer is yes—with the right plan. Here’s what you need to know about buying a house or car after bankruptcy:
Mortgage Waiting Periods After Bankruptcy
After filing for bankruptcy, there are mandatory waiting periods before you can apply for a mortgage, depending on the type of bankruptcy you filed and the type of loan you’re applying for:
For FHA and VA Loans The waiting period is usually 2 years after your chapter 7 discharge date. However, you may be able to apply earlier if you can prove “exceptional circumstances” and demonstrate you’ve re-established credit. Generally, you’ll need to wait 3 years after bankruptcy to qualify for a USDA loan.
Start Rebuilding Credit Immediately
It’s a good idea to start rebuilding your credit as soon as possible after bankruptcy by using secured credit cards, making timely payments, and reducing debt. This can help improve your credit score and show lenders you’re financially responsible.
Can I Buy a Car After Bankruptcy?
You can also buy a car after bankruptcy. After bankruptcy, you may need to rely on subprime lenders for financing. These loans usually come with higher interest rates, but they can help you secure a vehicle even if you have a low credit score.
Strategies to Improve Your Chances of Approval
If you’re considering purchasing a home or car after filing for bankruptcy, here are some strategies to improve your chances of success: Start rebuilding your credit as soon as possible after your bankruptcy discharge. This includes paying bills on time, keeping your credit card balances low, and monitoring your credit report for errors. A larger down payment can help offset the risk of lending and make it easier to secure financing. It also reduces your monthly payments.
Compare multiple lenders, including subprime lenders, credit unions, and online lenders. Don’t just accept the first offer—shopping around can help you find the best possible rates and terms.
If possible, having a co-signer with good credit can help you secure better terms for both home and auto loans. A co-signer essentially agrees to take responsibility for the loan if you default, which reduces the risk for the lender. Lenders are more likely to approve your loan if your debt-to-income ratio is low. Focus on paying down any remaining debts and maintaining stable, sufficient income.
In Summary – It’s possible to buy a home after bankruptcy, but you’ll typically need to wait anywhere from 1-4 years, depending on the type of bankruptcy and loan. You’ll also need to work on rebuilding your credit, saving for a down payment, and keeping your debt-to-income ratio low.
You can buy a car after bankruptcy, though you may face higher interest rates and stricter loan terms. However, having a larger down payment and rebuilding your credit can improve your chances of getting a loan with better terms. While bankruptcy may make purchasing a home or car more challenging, it’s certainly not impossible.
With patience, careful planning, and a focus on rebuilding your credit, you can eventually qualify for financing and make these big purchases again.
Have Questions? We're Here to Help
If you have any questions about the topic discussed in this article, or any bankruptcy law matter, please give us a call at Bononi & Company in Greensburg, PA 724-832-2499.