Regardless of the recent housing crises, getting a mortgage after bankruptcy is still possible, though still difficult. However, with a good plan and a willingness to rebuild your credit for a couple of years, this is definitely and achievable goal.
Most loans require you to wait at lest two years after bankruptcy discharge before applying for a mortgage. Lender will consider other factors than your credit score (though this is still an important part of the equation) when considering loan applications. The two main criteria will be your income level and your down payment amount. You can be asked to prove regular employment, regular income and access to financial resources. You will find that a larger down payment will be required, and the interest rates will be higher than normal. These kinds of terms, may not be great for the borrower, but gives the lender security on their expenditure and minimize their exposure to risk.
- Know your Credit Score: If you don’t know how your credit score looks after bankruptcy, you’re blindly heading for failure. You absolutely need to go and either gain a copy, or get a professional to look at it to tell you what needs to be fixed. There have been a lot of cases where debts are still showing as unpaid, or there are just errors on the score that needed to be fixed. Lenders analyze your credit score to determine whether or not to approve a home mortgage, a car purchase and nearly all other types of loans. Before lending you money, creditors want to determine how much of a risk you are in other words, how likely you are to repay the money they loan you. Credit scores help them do that, and the higher your score, the less risk they feel you’ll be.
The key to getting a home mortgage after bankruptcy is to immediately start rebuilding your credit.
- Making a large down payment means that you have made a significant commitment to the property you are buying, and indicates the lender that you are less likely to default on any payments, not only because you might lose your property, but also because you risk losing a significant amount of money. This being the case, sustaining on time payments and perfect credit history after bankruptcy is extremely important. Even the slightest sign of over and over again delinquent payments, overuse of credit or having too much debt may hamper your eligibility for a mortgage loan. Unfortunately, the sub-prime mortgage crisis has made life even more difficult.
- Two types of personal bankruptcy cases that the mortgage loan lenders deal with. The first is the chapter 13 bankruptcy where all your debts are reorganized over time and are finally paid out and the other is the chapter7 bankruptcy where all the assets of the debtors are liquidated. A chapter 13 filing stays on the credit report for 7 years as against the 10 years for chapter 7.
Conclusion: It is entirely possible for most people to secure mortgages after bankruptcy (even right after), but patience pays off. If you are certain that you will be able to afford a home and all of the costs that come with it, then you definitely can find a mortgage to suit your needs.