Can You Buy a House After Filing Bankruptcy?

Written By Matthew Thompson
Last updated July 9, 2021

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July 7, 2021

Simple. Thrifty. Living.

Many people believe that buying a house takes them one step closer to reaching the American Dream. Considering that 87 percent of home buyers relied on lenders to help them close deals, maintaining an excellent credit rating has become an essential part of the home-buying process.

Can you buy a house after filing bankruptcy? You can, but the damage bankruptcy does to your credit rating will force you to work very hard to qualify for a loan.

You can expect bankruptcy to lower your credit score by 160 to 200 points. Unfortunately, very few lenders will let you borrow money unless you have a credit score of 650 or higher. Even if you have the highest FICO score (850), losing 200 points will make it very difficult for you to get a mortgage.

Of course, you probably do not have a perfect credit score since you want to know whether you can buy a house after filing bankruptcy. Common issues include late payments, missed payments, and high credit card debt.

If you already have a credit score below 700, getting a mortgage to purchase a home will be much harder after filing bankruptcy. To make matters worse, bankruptcy will stay on your credit report for at least 10 years.

A low debt-to-income ratio can make it easier to buy a home even when you have a bankruptcy on your credit history. You can calculate your debt-to-income ratio by dividing your total monthly debt payments by your total monthly income.

For example, someone paying $1,000 per month on debt and making $3,000 per month after taxes will have a 33 percent debt-to-income ratio (1,000 divided by 3,000 equals 33.333 percent). Believe it or not, most lenders will interpret 33 percent favorably. They become reluctant once you reach 43 percent, though.

Can you buy a house after filing bankruptcy if you have a 33 percent debt-to-income ratio? Perhaps. Try your luck by reaching out to several mortgage brokers. Anyone that accepts your loan application will expect you to pay a higher rate of interest to offset the perceived risk.

If you have already have a bankruptcy on your record, there’s not much you can do other than start rebuilding your credit history by making excellent financial decisions. If you haven’t already filed for bankruptcy, talk to a lawyer or accountant about alternatives that won’t damage your financial reputation so much.

With that said, bankruptcy is the best option in some situations. An average of approximately 750,000 households and businesses file for bankruptcy each year to protect themselves from creditors.

Let’s assume you have already filed for bankruptcy. The following options could help you purchase a home even with the bankruptcy on your record.

Pay Cash for the Home

Can you buy a house after filing bankruptcy? You absolutely can when you have enough cash to purchase the property outright.

This option has some obvious challenges, though. The biggest is accessing that much cash after bankruptcy. If you have hundreds of thousands in cash, the court could make you use it to repay your lenders. You might find that you can sell other property, such as vehicles and valuables, to get the money. Still, you run the chance that the court will determine these funds should be used to repay your lenders.

Downsize Significantly

Can you buy a house after filing bankruptcy? It depends on your expectations. While you may not be able to qualify for a more expensive property, you might have the resources to buy a small fixer-upper.

Buying a foreclosure property could help you save hundreds of thousands of dollars on a home. You will need to pay in cash, though, so make arrangements ahead of time.

Work on Improving Your Credit

Your bankruptcy will stay on your credit history for a decade. As the years pass, though, lenders won’t see the bankruptcy as such a liability.

Spend the next three to five years devoting as much of your time and money as possible to improving your credit. If you want help from a credit card repair group, consider reliable options such as:

Technically, you can do everything that a credit repair company can do. However, help from professionals can make the process much easier.

If you decide to do it yourself, focus on:

  • Reviewing your credit report to identify and remove any inaccurate information.
  • Making all of your payments on time, including utilities, credit cards, and rent.
  • Lowering the amount of credit you access by repaying high-interest debts as quickly as you can.
  • Resisting the temptation to apply for new lines of credit, including car loans and credit cards.

Don’t expect your situation to change overnight. It may take years before lenders will take your mortgage application seriously. In the meantime, do everything you can to improve your credit history and rating. You will need a stellar record to counter the bankruptcy on your history.


Some homeowners will enter lease-to-own agreements. For the first few years of the agreement, you pay the owners a monthly fee. Basically, you rent the home. At the end of a predetermined period, you have the option to buy the property.

Lease-to-own isn’t an ideal situation, but it could put you on the path to homeownership. Make sure you save money and improve your credit rating during the years you pay rent. You might qualify for a mortgage in the end.

Can you buy a house after filing bankruptcy? You can, but it will likely take a few years. Consider creative solutions and dedicate yourself to improving your finances.

About the Author

Matthew Thompson

With more than two decades of writing and optimization experience, I know how to keep readers engaged, mimic brand voices, and get first-page rankings on search engine results. I have written for companies in diverse industries, including emerging technologies, wellness, consumer apps, enterprise software, UI/UX, outsourcing, and education.

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