Ways to obtain a mortgage after filing for bankruptcy
Have you recently filed for bankruptcy? Do you want to buy a home now? If yes, then you should know that though buying a home after filing bankruptcy is a daunting task, but it is not an impossible one.
Filing bankruptcy creates a negative effect on your credit score. In addition to that, you will be considered as a risky borrower by the lenders. You will not get qualified to obtain a mortgage loan, immediately after you declare bankruptcy. So, you should wait for at least 2 years after the discharge of bankruptcy. During that period you need to repair your credit first, to get eligible for the loan.
Tips for getting qualified for a mortgage
If you have filed for Chapter 13 bankruptcy, your chance of getting the loan will be more, because, the lender will be aware that as you are making payments to pay off your debt, you will also be able to repay your mortgage. However, you need to follow some tips to enhance your chances of getting the loan.
Some of the tips are as follows:
* Have a good DTI ratio: The lender will check your debt-to-income ratio, which will help him to determine of your affordability to repay the loan.
* Invest money: You can invest in certificates and bonds to assure your lender that you are trying to be financially secure and you would be able to make your payments on time. You can also use the money towards down payment.
* Avoid prepayment penalty: You should not go for a mortgage that has 2 to 3 years of prepayment penalty. In general, the lenders will offer you a high interest loan, as you have undergone bankruptcy (the interest rates for insolvency are upto 12 points higher than that of a regular mortgage), so, if you want to refinance your loan at a later stage, you will not be able to do so and will be stuck with the prepayment penalty.
Steps to repair your bad credit
In order to repair your bad credit, you need to follow the steps mentioned below:
* Check your credit report: When you file for bankruptcy, many old debts will get discharged. So, you should check your credit report and see whether or not these debts have been reported as discharged. If you find any anomaly, you should have it corrected.
* Obtain a secured credit card: Just after declaring yourself bankrupt, you will not be able to get any unsecured credit card. So, you should opt for a secured credit card with a low credit limit.
* Make regular payments: You should maintain regularity in making your payments and it will have a positive effect on your credit. You should avoid high balances on your secured credit cards, as high balances will lower your credit rating.
* Regularly review your credit report: You should check your credit report from time to time for finding out whether or not it has accurate information. The faster you can repair your credit, the more will be your chance of getting the mortgage.
After you have rebuilt your credit you can approach a lender to apply for a mortgage loan. Now the big question is “How do I obtain a mortgage after bankruptcy ?” . Only if you can have a good credit rating, you will win back the confidence of the lender and the process of buying a home after filing for bankruptcy will become easier for you. You also need to provide him with your salary stubs for the past 6 months, latest bank statements and tax returns for the past year.
* Can you refinance your mortgage after a bankruptcy? :Are you thinking “Can I refinance my mortgage after bankruptcy” If yes, then you should know that after a bankruptcy, you can very well refinance your mortgage loan for a reduced rate. It would help you lower the monthly payments on your mortgage loan.[Read More]
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