Bankruptcy Mortgage

One of the main worries people have about declaring bankruptcy is how it will affect their chances of owning a home in the future. For most bankruptcies, your debtors will not be able to take your home, so if you already own a home, you shouldn’t worry that much about anything happening. The real concern is more about whether a person that goes through a bankruptcy will be able to purchase a home later on down the line. Unless the individual saves enough money, he or she will be heavily reliant on a bankruptcy mortgage, or a mortgage after bankruptcy. 

The real issue stems from the fact that one—the person’s credit is probably in shambles due to the defaulted accounts that were perhaps discharged during the bankruptcy, and two—the actual mark that will exist on that person’s credit report for at least seven years. Lenders of mortgages weigh heavily your credit score, and your overall credit report when determining to approve your or not for a particular mortgage. They will look at the credit score and defaulted accounts and most of the time reject the individual applying for the mortgage. They will also see the bankruptcy as a major red flag, and most of the time this will be a disqualifying factor.

The good thing is that your chances of getting a bankruptcy mortgage don’t end there despite your bad credit and bankruptcy scar. The first thing you need to do immediately after your bankruptcy is to begin to improve your credit. This means taking out some low limit credit cards, or some small loans, that can begin to re-establish a record of trust that a lender can clearly see. After you begin to improve your credit, you then need think about the other factors that can affect whether or not you get approved.

This means that you must now be taking a good look at your entire financial situation, which probably isn’t the greatest right after a bankruptcy. You won’t have any chance at getting a mortgage after bankruptcy if you don’t have an income, so make sure you keep your job as long as you can. A two-year plus employment history is preferred by most lenders, and almost any kind of added income such as stocks, or real estate, is looked upon fondly by most lenders. Next you need to figure out what you’re going to do about the down payment that is required for your mortgage. Five to about twenty percent is the standard amount that is required for most mortgages, and if you don’t have this money, I wouldn’t recommend applying.

The key is to try and improve your application as much as possible where you can. This means that you should try and better all of the aforementioned factors because you can makeup for your bad credit by strengthening the other major factors in your application to a certain degree. For example, if you can come up with a forty percent down payment, and you have a debt to income ratio that is significantly above the lenders requirements, they may perhaps overlook your bankruptcy and credit, as long as they see that it is steadily beginning to improve.

There are also different kinds of lenders that specialize in making home loans to people emerging from bankruptcy. These so-called, “bad-credit” lenders, understand what happens when someone is coming off of a bankruptcy, and if you don’t mind working with a lesser-known bank or institution these institutions might be the right choice for you. There are also all sorts of government programs that can assist people who get into debt trouble as well as bankruptcy. Do some online research, and you’ll probably find some reputable government websites that can explain these programs in detail.

Most of the time, a lender won’t consider any applicant that has filed for bankruptcy less than two years before they apply. During these two years, you should be building up your credit and researching the various options available to you. Once you have some down payment money saved up, have rebuilt your credit a bit, and have identified some lenders that might potentially do business with you, you should then be ready to begin applying. The bottom line is that you will be able to get a mortgage after bankruptcy as long as you can get the factors that are in your control in order so that you will have a better chance at getting approved. Regardless, the bankruptcy should be entirely off your credit report after seven years, so as long as you don’t mind waiting you should be back to square one eventually.