Most people think that if you have a bankruptcy listing on your credit report, you have zero chance of ever getting a mortgage again. Even four or five years ago this might have been true, but these days it’s definitely possible to get a mortgage, even if you have a bankruptcy in your past. Bankruptcy definitely doesn’t help your credit rating at all, but if you explore your options fully, you’ll see that it’s still possible to obtain a mortgage. So what do you need to do?

Steps One: Repairing your Credit

To prepare your finances for obtaining a mortgage after you’ve been bankrupt, it’s true that you might have to work a little harder than someone with a credit rating that’s more acceptable to lenders. But it can be done! Use the following steps as a guide for preparation.

1. Make a list of your family’s monthly income – be realistic, and include only the income that is 100% reliable, that you know you can count on every month. If you have any other sources of income that aren’t 100% guaranteed, add those to a separate list (this ensures that the "sometimes" income won’t put a strain on your budget).

2. Make another list of your family’s monthly expenses. If you’re not sure what your expenses are, keep all your receipts for a month to give you an exact picture of where you’re money is going. Saving receipts is the best way of getting a clear idea of where the money goes – small purchases add up over the course of a month.

3. Make a budget that you know you and your family can stick to. Make sure all the bills are paid before allotting money for entertainment and other luxuries.

4. Pay all bills on time, and make sure that your loans and credit card debt are listed with credit card bureaus. This will make sure your creditors have proof you’re working to pay debts on time and are serious about repairing your credit. Showing your creditors that you can live within your means is one of the most important steps to getting a mortgage after bankruptcy.

By law, you can apply for a mortgage as little as a single day after your bankruptcy is discharged. However, it’s not necessarily a good idea to do so. It’s important to make sure your credit score is as high as possible, so that you can obtain a mortgage with an affordable interest rate. If you’re approved for a mortgage you can’t afford, those high interest rates will only send your finances reeling again. And if you apply for a mortgage and aren’t approved, the rejection can hurt your credit score all over again.

To give you every chance of repairing your credit and improving your chance of mortgage approval, it’s a good idea to wait at least a year after bankruptcy discharge before applying for a mortgage (and note that some lenders may require you to wait even longer – maybe two or three years).

During this time, it’s important to do everything you can to repair your credit rating. Don’t forget to apply for copies of your credit report and check for errors or obsolete information that might have lowered your rating unfairly.

Finally, note that other factors improve your chances of obtaining a mortgage after bankruptcy. These include your employment history, current income, the size of your down payment, and the loan-to-value ratio of the home you plan to buy.

Step Two: Getting the Mortgage

Preparing to apply for a mortgage is actually more important than applying for the loan. Preparation is what enables you to obtain the mortgage, and if you’ve done enough preparation, you should find a mortgage is obtainable.

Once you’re at the point where you’ve repaired your credit enough that mortgage approval is a possibility, it’s time to start applying for a mortgage. The important thing to understand at this point is that even though you’ve been working hard on your credit score, and proving to your creditors that you can pay your debts, you may still have trouble getting a mortgage from some lenders.

One point to consider, when you apply for a mortgage after bankruptcy, is working with a mortgage broker. You may not have thought about this, but it can be very useful to work with a broker, because they have access to many different lenders, and dozens of mortgage packagers. This puts you in a much better position to find a mortgage with an affordable interest rate. Try hunting for a broker who has experience in working with people who have undergone bankruptcy – with an experienced broker working for you, getting a mortgage will be much easier.