Bankruptcy can leave a derogatory mark on one's credit score 10 years, but that doesn't mean that Tennessee residents that have filed to escape their debt have to wait a decade in order to purchase a home. Home ownership is possible a few years after a bankruptcy, but only if a consumer is dedicated enough to properly plan, save and budget his or her money in order to prevent future financial challenges from occurring. Here are some tips for buying a home after bankruptcy.
The first step may be the hardest, but it's the most important: wait. Home ownership is important to many people, but it's also important to let the dust settle on the bankruptcy paperwork. It's a good idea to take some time examining the situation that caused the debt to occur in the first place. If any bills survived the bankruptcy, pay them on time.
It's also important to start saving money and planning for the future. Ideally, a home buyer needs a 20 percent down payment. So for a $200,000 home, that's $40,000. That's a lot of money and a huge investment for someone fresh out of a bankruptcy, so start saving as much as possible. Planning is also important, since appliances tend to break down and homes require repairs. There are also electricity, gas, water and sewer bills to consider, as well as maintenance and landscaping. These expenses can add hundreds to the monthly cost of a home, so keep this in mind when looking for a home.
Purchasing a home after bankruptcy is challenging, but not impossible. Be prepared for a lot of denials. If a consumer is approved for a mortgage, he or she should expect higher interest rates and upfront costs. Remember that saving money and improving a credit score takes time.
Source: Credit.com, "5 Steps to Buying a Home After Bankruptcy,"Gene Melchionne, May 8, 2015