Buying a house\u00a0after bankruptcy may sound like an impossible feat. Blame it on all those Monopoly games, but bankruptcy has a very bad rap, painting the filer as someone who should never be loaned money. The reality is that of the\u00a0800,000\u00a0Americans\u00a0who file for bankruptcy every year, most are well-intentioned, responsible\u00a0people to whom life threw a curveball that made them struggle to pay off past debts. Sometimes filing for bankruptcy is the only way out of a\u00a0crushing financial situation, and\u00a0taking this step can really help\u00a0these cash-strapped\u00a0individuals get back on their feet. And yes, many go on to eventually buy a home. Only how? Being aware of what a lender expects postbankruptcy will help you navigate the mortgage application process efficiently and effectively.\u00a0Here are the steps on buying a house after bankruptcy, and\u00a0the top things you need to know. Types of bankruptcy:\u00a0The\u00a0best and the worst There are two ways to\u00a0file for bankruptcy: Chapter 7 and Chapter 13.\u00a0With Chapter 7,\u00a0filers are typically released from their obligation to pay back unsecured debt-think credit cards, medical bills, or loans extended without collateral. Chapter 13\u00a0filers have to pay back\u00a0their debt, only it's\u00a0reorganized to come up with\u00a0a new repayment schedule that\u00a0makes monthly payments more affordable. Since Chapter 13 filers are still paying back their debts, mortgage lenders generally look more favorably on these\u00a0consumers than those who file for Chapter 7, says David Carey, vice president and residential lending manager at New York's Tompkins Mahopac Bank. How long after bankruptcy\u00a0should you wait before buying a house? Most people applying for a loan will need to wait two years after bankruptcy before lenders will consider their application. That said, it could be up to a four-year ban, depending on the individual and type of loan.\u00a0This is because\u00a0lenders have different "seasoning" requirements, which is a specified amount of time that needs to pass. Fannie Mae, for example, has a minimum two-year ban on borrowers who have filed for bankruptcy, says\u00a0David Reiss, professor of law and academic programs director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. The FHA, on the other hand, has a minimum one-year ban in place after a bankruptcy.\u00a0The time is measured starting from the date of discharge or dismissal of the bankruptcy action. Generally the more time that passes, the less risky a once-bankrupt borrower looks in the eyes of a lender. How to reestablish credit after bankruptcy Once the bankruptcy process is over, reestablishing and maintaining\u00a0creditworthiness is key to your financial health. Lenders will be looking for zero delinquencies postbankruptcy. While you work to build\u00a0new credit, don't go overboard opening an extensive number of accounts, as this will work against you, advises Carey. Usually opening just a couple of revolving credit\u00a0lines and paying them in a timely manner over the course of 12 months help to increase credit scores\u00a0back to an acceptable level. What to do before you apply for a mortgage Before you apply for a loan, get copies of your three main credit reports, which detail the financial transactions (and transgressions) from your past. You will want to check\u00a0these reports for\u00a0errors such as a credit issue you resolved but is not reflected in your report. "In some postbankruptcy cases,\u00a0errors continue to report negatively on credit reports," says Carey. These\u00a0mistakes will drag down\u00a0your overall credit score and reduce your chances of getting approved for the mortgage. So if you spot mistakes, work with the credit bureaus to correct the information they include. Buying a house\u00a0after bankruptcy: Ways to woo a lender To start the mortgage process, lenders require a detailed letter explaining\u00a0why you needed to file for\u00a0bankruptcy in the first place. Ideally, the bankruptcy would have been caused by an extenuating circumstance beyond\u00a0your control-such as the death of an income-contributing spouse, the loss of employment, or a serious illness. In other words: A lender likes to see that you were hit with hard times that\u00a0had a significant negative impact on your expenses or income, and made it impossible to meet your\u00a0financial obligations. What\u00a0a lender\u00a0won't want to\u00a0see is someone with a die-hard shopping habit or lackadaisical attitude toward paying credit cards on time. If that's you, you'll have to prove you've changed. Whatever the reason you filed for bankruptcy, lenders will need to properly document your extenuating circumstances, so be prepared to provide proof detailing your life event. Medical bills, a doctor's note, a death certificate, or severance paperwork are all acceptable evidence that prove to lenders that you are a safe bet worthy of a home loan. The post Buying a House After Bankruptcy? How Long to Wait and What to Do appeared first on Real Estate News & Insights | realtor.com\u00ae.