Getting a Home Mortgage After Bankruptcy
Many people feel as though it is impossible to get a home mortgage after bankruptcy. And, while the current credit market crunch might make it even more difficult, it is possible to get a home mortgage after bankruptcy. But you will need to show that you are working to rebuild your credit, and that you have been acting responsibly since your bankruptcy.
Fixing your credit after bankruptcy
The first thing you need to do is work on fixing your credit after a bankruptcy. This is time to start fresh. Apply for small amounts of credit that you can pay back. A secured credit card is one of these types of tools that can help you improve your credit score. Create a budget and stick to it. Live well within your means, and set aside some savings. This will help you manage your money better, and you can start saving up for a down payment. Pay all of your bills on time, and in full.
Asking a lender for a home mortgage after bankruptcy
Art of Abundance points out that you should be up-front with your lender when you try to get a home mortgage after bankruptcy:
When you talk to lenders about pre-approval, be up-front about your bankruptcy — and be equally as up-front about the great job you’ve done rebuilding your credit in a short time.
You may have to provide a letter or statement explaining why you had to file bankruptcy (the death of the provider, a divorce or a medical catastrophe are all extenuating circumstances that may be considered). You will also have to outline the steps you are taking to rebuild your credit. If the bankruptcy was beyond your control, show how responsible you were before the devastating events that ruined your finances. If it is mostly due to consumer debt, show how you better understand finances, and how you are determined to be more responsible in the future.
Your bankruptcy can remain on your credit report for 7 to 10 years. Try and wait at least 2 years, building your credit score, before applying for a home loan. And if you try to get a home mortgage now, after bankruptcy, realize that the lending standards have tightened and that you will need to have a higher credit score. And you will pay more in interest (you can consider refinancing down the road). Even though you may have a harder time, it is still possible to get a home mortgage after bankruptcy.
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February 12th, 2008 at 12:54 pm
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