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Does filing for bankruptcy mean you can't ever buy a home again?

While it may be difficult to believe, it's almost been a decade since the downturn in the housing market. Things are looking much different than they did when the recession was at its lowest point. Homeownership is something that many people can finally become part of again.

That is, unless you filed for bankruptcy, right? Actually, that's not the case anymore. Many people who filed for bankruptcy or lost their homes to foreclosure are beginning to get back on track financially, and the required "waiting periods" required by lenders are being met.

There are guidelines that dictate how someone who has filed bankruptcy can qualify for a mortgage. This includes those who lost their home in foreclosure and still had to filie for bankruptcy. In many cases, bankruptcy is the only viable option that many families have after a foreclosure when the deficiency on the mortgage becomes too great to pay off.

A deficiency in this scenario is the amount of the loan minus the amount the sheriff's sale brought. If a family had a mortgage balance of $75,000, but the home sold on the courthouse steps for $50,000, then the deficiency is $25,000. It can be unrealistic for many people to pay off such a sum. Bankruptcy is often the only way to clear the deficiency.

There are waiting periods following bankruptcy that are required by all four main categories of mortgage loans. Conventional mortgages have four-year waiting periods; Federal Housing Administration and Veteran's Administration loans require two years to lapse post-bankruptcy. For U.S. Department of Agriculture loans, the required wait time is three years.

Becoming a homeowner again is possible after bankruptcy, but it's important that you begin rebuilding your credit. Open a credit account and make the payments on time, every month. A credit profile that has more than just credit card accounts can be more appealing to lenders. It's possible that with strategic planning, you can build your credit back up to a level that will allow you to qualify for a mortgage.

Your bankruptcy attorney will have more information about rebuilding your credit after bankruptcy so that you can emerge as a homeowner again sooner than you might think.

Source: The Mortgage Reports, "Don’t Think You Can Buy Again After Bankruptcy? Actually, You Can," Adam Lesner, accessed Sep. 30, 2016

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