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If you have been bankrupt in the past and are considering applying for a home loan, there are important considerations you will need to think about.

 Discharged bankruptcy is when you have been released from the bankruptcy status. Applying for credit may become more difficult as your options will be limited. Most mainstream home loan products will be off limits for those with a history of bankruptcy.

Can I apply for a home loan after discharged bankruptcy?

Bankruptcy can be extremely damaging for your credit file, but it does not mean you should rule out applying for a home loan completely. Although you will find it very difficult to obtain a home loan while undischarged bankrupt, once you are discharged, lenders may be more willing to give you a home loan.

As most lenders will consider you a high risk borrower, you will most likely have to pay a higher interest rate and other fees. However, if you are able to show the following, you may be able to get a lower interest rate:

• Save a deposit of 20% or more

• Have a strong repayment history

• Have a good employment history

• Give proof to show that the bankruptcy was a one-time mistake

Some lenders will have different lending requirements, so before applying for a home loan, speak with the lender to see if you are eligible.

Can I still create a strong credit report?

Despite this bump in your finances, you still have an opportunity to turn your finances around. Although bankruptcy usually lasts three years, it will still remain on your credit file for seven years. However, you can use this time to change your habits and repay bills on time.

In March 2014, Australia will be changing to a positive credit reporting system which means that lenders will be able to see the past 24 months of your repayment history. This gives you the opportunity to show a lender that you are making an effort to keep your finances in order.

Also, if you can show that you have a strong employment history, a strong savings history and can also put together a deposit, it will help show the bank that you will be able to handle the responsibility of having a home loan.

Need help with getting a home loan?

If you are finding the above confusing then don't despair. State Custodians have experienced lending specialists who can do the calculations for you and discuss which home loan options would be right for you. Just call on 13 72 62.