Friday, 7 February 2014

Eventuating a mortgage post bankruptcy - What are your chances?

Posted at  01:03  |  in  Mortgage

Eventuating a mortgage post bankruptcy
You have found a dream home and you’re eager enough to get a mortgage loan, move into the property and realize your dream of homeownership. But the only problem arises when you have been through extreme financial hardship in the past, if you’ve filed for bankruptcy. If you’ve filed bankruptcy in the recent past, this will certainly have an impact on your attempts to take out a home mortgage loan in the long run. Bankruptcy is not the end of your financial life and you need not fret thinking that you won’t be able to take out a mortgage ever again since you’ve already filed bankruptcy in the past. It is still possible to get a mortgage loan even though you’ve filed bankruptcy in the past, the only difference would be that you might not be offered too low a mortgage rate unlike a borrower with stellar credit rating.

Post Chapter 7 bankruptcy, you require waiting for at least 2 years from the date of bankruptcy discharge before applying for a mortgage loan insured by FHA and 4 years to get a conventional mortgage loan. If you’re going through extenuating financial circumstances, the time span can be reduced to 1 year with an FHA mortgage loan. With a Chapter 13 bankruptcy, the waiting period is usually 1 year post bankruptcy discharge. Nevertheless, although the waiting period for each kind of bankruptcy will differ, you can still get a mortgage loan by following some effective tips. Here are some tips that you may consider while taking out a mortgage loan after bankruptcy.

1. Current new rules don’t pay heed to waiting periods: Unlike what is mentioned above, after the new mortgage rules come into effect in 2014, you don’t need to wait for the entire time period in order to take out a mortgage loan. It is possible to get mortgage financing even before the 2 year time period but you will get a private loan instead of the conventional loans and here you have to pay down a higher amount (often 30-35%) and the interest rates may also be higher than normal.

2. Get a quick check on your credit score: Before you take the plunge into the market, you need to take a quick glance at your credit score. Get a free copy of your credit report from the 3 credit reporting agencies so that you may be able to check the listings that shape up your credit score. If you’re someone who has been a victim of identity theft, you will get to know about the negative listings that are dropping down your credit score. Dispute the errors and make sure you repair your credit score so that you don’t face high interest rates in the near future.

3. Choose the right mortgage lender: Not all mortgage lenders will be eager to lend you mortgage loans when they come to know about the fact that you’ve filed bankruptcy in the recent past. Hence, you should be careful enough while choosing the mortgage lender as it is very important to choose the right one that offers you some of the best rates within your means, despite considering you as a bankruptcy candidate.

4. Avoid switching jobs before applying for a loan: If you’re about to take out a home mortgage loan, you should avoid switching between jobs as this will have a bad impact on your loan application criteria. The lender will look for 2 years of stable income and therefore you have to ensure having a stable job in order to take out a home mortgage loan post bankruptcy. Stick to a job as this will make the lenders believe in your credibility as a borrower.

Hence, when you’re worrying about the upshots of bankruptcy and you’re about to give up on your home buying dreams, you should take into account the above mentioned tips. Shop around and get multiple quotes from multiple lenders to grab the best loan in the market while you borrow money for buying your dream home.

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Jimmy Simond is founder of he share his immense knowledge of finance in this blog. You can follow him on Google+.

1 comment:

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