People file bankruptcy for a variety of reasons: divorce, medical reasons, or loss of employment; whatever the reason, do not think this is a stain you will never overcome. There are mortgage lenders that specialize in financing individuals with bankruptcy or other credit problems. In fact, bad credit lending is a booming business and many lenders are falling over each other to get a slice of it.

If you have recently filed for bankruptcy you should wait at least six months after your bankruptcy has been finalized to start rebuilding your credit. To rebuild your credit start by making sure you pay your current mortgage on time. Avoid late payments at all costs.

Open a credit card; while maintaining a low balance, make your payments on time. Open a savings account and start putting money in the bank. Go through your attic and set up eBay auctions to help put money in the bank. You will need this cash when you are ready to qualify for a new mortgage. Taking on a second job for a spell would help build up cash in your new savings account.

After you have six months of on time payments under your belt, and you have put away some money, you are ready to begin researching mortgage lenders. The Internet is an excellent tool that will allow you to comparison shop from a variety of mortgage lenders. Compare interest rates and fees from no obligation quotes. Do not let lenders run your credit at this point. Too many credit inquires will damage your already fragile credit score.

Since you have a recent bankruptcy on your record you will need to focus on subprime mortgage lenders. These are the mortgage lenders that specialize in lending to people with credit problems such as bankruptcy. Expect to pay a few points higher than you would working with a traditional lender; this is the premium you will pay to secure your new mortgage.

If your goal is to rebuild your credit you should avoid cashing out equity in your home with the new lender. This will only increase your debt ratio; keeping the equity in your home will serve to improve your credit.

The process of rebuilding your credit will take several years. After a solid three to four years of on time payments and responsible spending with your credit cards you will be ready to migrate to a traditional mortgage lender at a much lower interest rate.