A bankruptcy filing delivers a devastating blow to your credit and FICO score, but it doesn’t mean you have to wait 10 years before you can qualify for a mortgage. Many consumers who have filed for bankruptcy have been able to obtain a mortgage, although it is often at a much higher rate than someone qualifying for a prime or A-paper loan.
While credit card companies may care about what happened before you filed for bankruptcy, many mortgage lenders are more interested in your recovery — what you’ve done since your filing. It won’t happen over night, but here are some tips and things to keep in mind when you inquire about a mortgage with a tarnished credit past:
No mortgage lender is going to ignore the fact that you have filed bankruptcy. He or she will need to know and document the cause of the filing. Your lender will be particularly interested in whether the same situation could happen again. Your chances of being qualified are much better if your bankruptcy was caused by a single event such as a loss of employment or a death in the family, than if it was the result of “just spending too much.” Your documentation and Letter of Explanation will go along ways to helping get you a mortgage and securing the best loan terms available.
If the bankruptcy resulted from a single event, it is important to show your lender paperwork describing the incident, such as the layoff notice or death certificate. You may also want to bring in court documents to indicate when the bankruptcy was filed.
Demonstrate Good Money Habits Now.
Many people who file bankruptcy swear off credit altogether, however, it is important to re-establish your credit rating. Get a secured credit card or take on some sort of loan — furniture, a car or a major appliance — to demonstrate that you are able to make timely payments. Make sure you are making other payments (utility bills, cell phone, etc.) on time as well. You wont turn things around in a year but your credit score will improve over time.
Dispute Any Credit Report Errors.
There’s no need to add to your troubled credit history with errors on your credit report. Get a copy of your credit report from each of the three major credit reporting agencies: Equifax, http://www.equifax.com; Experian, http://www.experian.com; and TransUnion, http://www.tuc.com. If you encounter any errors, inform the CRA in writing what information you believe to be inaccurate and request deletion or correction.
Save Your Money
Lenders may be more willing to loan you money if you’ve saved up a considerable amount of money for a down payment.
Live Within Your Means
Think affordability when the time comes to look for a home. Smaller homes often mean smaller mortgages. Even subprime lenders won’t risk loaning you money for an opulent oceanfront mansion. You will want to ask Korene about debt management, total income, and financial planning options before you purchase your new home.
If You Must File, Do you Need A Referral
We deal with many attorneys across the Southwest USA. If Bankruptcy is the option you are considering or if your bankrupcty has left issues and questions, would you like us to give you a referral to a certified and licensed attorney? Ask Korene for a referral.