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Rebuilding Your Life: 7 Tips for Getting a Mortgage After Bankruptcy

Rebuilding Your Life: 7 Tips for Getting a Mortgage After Bankruptcy

A qualified attorney has the skills and resources to temper the outcome of your bankruptcy case into the start of a stable, debt-free chapter of your life. Of course, it’s not unusual for former debtors to stumble a bit as they adjust to their new circumstances and explore their limited financial options. But once a former debtor’s confidence starts climbing with their credit score, they may start to wonder, “Will I ever be able to buy a home?”

The answer is yes, and you may even be able to get a loan approval sooner than you think.

Your Mortgage Application

Most Americans lack the means to purchase a home in this economic climate. They instead apply for fixed-rate mortgage loans through banks and lenders. However, mortgage lenders and guarantors usually hesitate to lend money to anyone who doesn’t seem prepared for the financial responsibilities associated with homeownership.

Depending on your lender, you may need to build up your credit for 1-4 years before your application will be accepted. For instance, if you received a discharge by filing Chapter 7, you’ll need a wait a minimum of 2 years before you can successfully apply for a Fannie Mae or FHA loan. Likewise, most banks insist that former debtors wait 3 years before applying.

If you discharged your debts by completing a Chapter 13 repayment plan, you may be able to qualify for an FHA loan immediately. In fact, some debtors don’t even need to wait until their case is over to apply.

You need to be in good financial standing if you want to purchase a home. Follow these tips to prepare your credit score:

  1. Formalize your bankruptcy discharge
  2. Work on rebuilding your credit score by paying your bills and using a secured credit card
  3. Regularly request copies of your credit report to check for errors
  4. Contact your preferred lender to learn about their waiting period
  5. Start building a sizeable down payment (preferably at least 20%)
  6. Document the extenuating circumstances behind your bankruptcy
  7. Send this documentation with your application

Securing a loan requires more than a quality application. You need to be prepared to answer any questions the lender has about your bankruptcy case. Most bankruptcy cases are caused by unemployment, divorce, medical emergencies, and family losses. By making the lender aware of your extenuating circumstances, you may be able to smooth your way into a beneficial loan. Case in point: if you’re interested in an FHA loan, the waiting period can be shortened to 1 year if you originally filed for bankruptcy because you lost your job – so long as you have steady employment now.

Have Questions or Concerns? Contact an Experienced Bankruptcy Attorney

Contact the Northbrook bankruptcy lawyers at Bach Law Offices if you’re preparing to file for bankruptcy or need advice about your financial future. We can explore your legal options and prepare you for a life free of financial anxieties and insurmountable debts.

Contact Bach Law Offices at (847) 448-0025 to schedule a free consultation.

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