Lenders evaluate debt, employment and credit before approving mortgages. If you have filed for bankruptcy, you might be worried about rebuilding your credit, especially if you want to buy a house. The good news is that if you manage your debt, hold a job and re-establish good credit, after some time you can buy a house--even after a bankruptcy.

Secured Credit Card

Some banks offer secured credit cards. These are credit cards that have a low limit. The bank sets a limit that is usually based on an amount of money that you prepay. So to get a credit card with a $300 limit, you will need to prepay the card issuer $300. As you use it, you still make regular payments and must do so on time to re-establish good credit. Fair Isaac Company (FICO), the organization that compiles your credit scores and reports them to mortgage lenders as one averaged score, recommends responsibly using a secured credit card to re-establish credit after a bankruptcy.

Use Utility Bills

Not all banks will take into account timely payment of utility bills, but some will, depending on the underwriting guidelines with which they must work. When you are ready to shop for a mortgage, it's a good idea to ask about this. If the lender will consider utility bill payments, it will help enhance your credit profile, and you will be more likely to get a mortgage.

Co-Signer

A relative, spouse, friend or even an employer can co-sign a mortgage note for you. It's hard to ask someone to do this, but if someone with good credit is agreeable, the likelihood of your loan being approved by the bank improves. Showing the candidate your paid rent, utility and secured credit card receipts is a way to demonstrate that since you've been out from under heavy debt, you are responsible with money.

Debt-to-Income Ratio

The mortgage lender will evaluate your debt-to-income ratio before approving a mortgage. The bank will want to see that your debts, including the new mortgage, do not exceed a certain percentage of your income, usually 36 percent, but sometimes more.

Time Helps

The passage of time will help you achieve your goal of buying a home of your own. Though the bankruptcy will show on your credit report for 10 years, it becomes less important to lenders as it ages, as long as you've re-established good credit otherwise. The law firm Grossbart, Portney and Rosenberg of Baltimore Maryland says that it can take as little as two years before a bankruptcy petitioner can get a mortgage.

Go to the Horse's Mouth

It's smart to talk to a lender or two before you are ready to buy a house. An experienced loan officer will advise you on how to prepare to buy, taking your bankruptcy circumstances into account. Solid advice on debt and credit management is timeless, but advice based on underwriting guidelines is time sensitive. They frequently change, so current guidelines may be more or less stringent than they will be in one to two years from the time of your conversations with loan officers.

Source:

Grossbart, Portney & Rosenberg, Attorneys at Law: Will I Be Able To Buy A House If I File Bankruptcy?

University of Maryland University College HSBC North America Military Financial Education Center: Bankruptcy and Your Financial Future

My FICO: How Can I Minimize the Negative Effect of a Bankruptcy?

More Information:

My FICO: Make Sure You're Ready for a Home Mortgage Loan

IN.gov: Credit Repair Scams