How to get a Mortgage After Bankruptcy
If you find yourself in a situation where you are drowning in debt, declaring bankruptcy may be an excellent option. Bankruptcy is intended to assist persons who have exhausted all other options and cannot find a way out. Using all of your assets to repay as much as possible over a specific period of years is doable, and you can start over from the beginning. Declaring bankruptcy releases you from the harassment of creditors and collection agencies, and you are given the opportunity to start over with a clean slate in your financial life.
Almost, at any rate. It will indicate on your credit report that you have filed for bankruptcy after declaring it on your own. Because you filed for bankruptcy, it is likely that your creditors did not receive the full amount of money they were owed. If potential lenders learn that you have filed bankruptcy in the past, they will consider you to be a very high-risk candidate because it is possible that you have not adjusted your financial situation. Obtaining a mortgage following a bankruptcy can be particularly challenging, but there are several approaches that can be taken.
First and foremost, establishing credit, whether good or poor, takes time. If you file for bankruptcy, you will have your credit history completely erased. However, this covers any good credit you may have had in the past as well as the present. This means that you have to start from the beginning. You will be treated in the same way that a mortgage lender would treat a young adult with minimal credit history as a high-risk candidate, and you will be treated in the same way. Even if you can explain to your lender until you are blue in the face how you intend to change, demonstrating your intentions is a more effective method of doing so. Continue to build your good credit and wait at least two years before even thinking about approaching a lender about getting a loan.
If you are having difficulty getting a mortgage, you may qualify for one of the several government-sponsored programs. Some realtors may collaborate with you in order to put less money down on your new house and convince a lender that you should qualify, regardless of whether you have declared bankruptcy in the past. In the event that you currently have a stable income and are striving to pay down debt, you may be eligible for some of these government programs.
A lender may accept your current home as collateral provided you can demonstrate that you have equity in the property. If you wish to borrow less money than you need, this reduces the risk you provide to a lender. For this reason, your lender is more likely to overlook the fact that you have filed bankruptcy in the past if you can pay for the majority of your new home by selling your current property.
The most important thing to take away from this is that declaring bankruptcy should never be taken carelessly. You must be totally certain that it is the best decision for you before moving forward with the purchase. A bankruptcy should be considered as a last resort financially, because it will make things like getting a mortgage more difficult in the future.