Filing for bankruptcy in Michigan might have been the toughest moment of your life. But, besides helping you settle your debts or restructuring your business, you can get your life together as it was before. The first place to start is getting a home. Therefore, let’s look at how to buy a house after bankruptcy.
Steps to buying a house in Michigan after bankruptcy
Work on your credit score: Having a bankruptcy on your credit report indeed lowers your credit score. But, you may still be able to get a mortgage loan for a house. The only condition is to meet your lender’s minimum requirement for a credit score before you get approved. Some ways to improve your credit score include getting a secured credit card, paying your bills on time, and settling all your debts.
Write a letter of explanation: Lenders make their money by giving out loans. So, before they take that risk, you will need to convince them that you are a safe bet. Therefore, in your letter, provide a detailed explanation of the underlying problems that led you to bankruptcy, what you’ve done to deal with your situation thus far, and your steps to prevent it from happening again. In this letter, you will need to include your financial documents like bank statements, most recent pay stubs, tax returns, and W-2s.
Get pre-approved for a mortgage: You need to know how much you can afford to spend on a house before you start looking. Additionally, the home seller or the real estate agent would want to confirm that you can secure funding before they let you sign any documents. The lender you sent your pre-approval letter of application will review it then decide if they can give you the loan amount you want or not. If they approve, you can start looking for a house.
Keep in mind that you cannot get a mortgage immediately after filing for bankruptcy; there is a waiting period depending on the lender you are considering. The waiting period for Chapter 7 is often between two and three years, while for Chapter 13 is between two and four years.