In the past 6 years, more than 5 million North Americans have filed for bankruptcy. And while many people believe that filing for bankruptcy causes long-term financial ruin—and will keep them from ever being able to purchase a home—it turns out that might not be the case.
According to The Cost of Bankruptcy, a recent study from Lending Tree, within a year, 43% of people with a bankruptcy on their record are able to get their credit score to 640 or higher, which is the credit level typically necessary to qualify for a mortgage. Within two years of filing bankruptcy, that number jumps to 65% and at five years, 75% of people who filed bankruptcy have a credit score of 640 or above.
Now, if you have a bankruptcy on file and a credit score on the lower end of the qualifying spectrum, you're likely to pay higher interest rates. But if you can get your score up, your bankruptcy is unlikely to have a major impact on your loan. According to the study, people with a credit score between 720 and 739 who applied for a mortgage three years after filing for bankruptcy were offered similar interest rates to those without a bankruptcy on their credit file.
If you have a bankruptcy on your credit file, buying a home is still possible. Focus on raising your credit score and you might be able to make your dream of homeownership a reality sooner than you ever thought possible.
If you're curious about whether or not you would qualify to purchase a home, reach out for a confidential chat! I'm happy to discuss your situation with you and recommend a mortgage broker who could help you get the ball rolling!