A bankruptcy filing delivers a devastating blow to your credit
and FICO score, but it doesn’t mean you have to wait
10 years before you can qualify for a mortgage. Many consumers
who have filed for bankruptcy have been able to obtain a mortgage,
although it is often at a higher rate than someone qualifying
for a prime or "A-paper" loan.
While credit card companies may care about what happened
before you filed for bankruptcy, many mortgage lenders are
more interested in your recovery — what you’ve
done since your filing. It won’t happen over night,
but here are some tips and things to keep in mind when you
inquire about a mortgage with a tarnished credit past:
Give explanations. No mortgage lender is
going to ignore the fact that you’ve filed bankruptcy
and he or she will likely want to know the cause of the filing.
Your lender will be particularly interested in whether the
same situation could happen again. Your chances of being qualified
are much better if your bankruptcy was caused by a single
event such as a loss of employment or a death in the family,
than if it was the result of “just spending too much.”
If the bankruptcy resulted from a single event, it is important
to show your lender paperwork describing the incident, such
as the layoff notice or death certificate. You may also want
to bring in court documents to indicate when the bankruptcy
Demonstrate good money habits now. Many
people who file bankruptcy swear off credit altogether, however,
it is important to re-establish your credit rating. Get a
secured credit card or take on some sort of loan — furniture,
a car or a major appliance — to demonstrate that you
are able to make timely payments. Make sure you are making
other payments (utility bills, cell phone, etc.) on time as
well. You won't turn things around in a year but your credit
score will improve over time.
Dispute any credit report errors. There’s
no need to add to your troubled credit history with errors
on your credit report. Get a copy of your credit report from
each of the three major credit reporting agencies: Equifax,
http://www.equifax.com; Experian, http://www.experian.com;
and TransUnion, http://www.tuc.com. If you encounter any errors,
inform the CRA in writing what information you believe to
be inaccurate and request deletion or correction.
Shop around for a lender. There are many
alternative lending sources — also known as B and C
lenders or subprime lenders — that provide mortgage
financing for someone with a damaged credit history who is
considered a “high risk” borrower. These types
of lenders reduce their risk in making loans by charging borrowers
a higher interest rate and sometimes additional fees. In fact,
many lenders have “comeback” loan programs for
people recovering from bankruptcy that often include credit
reports, credit counseling referrals and consumer education.
You may also want to seek advice from a reputable mortgage
broker who can review your situation and let you know what
Save your money. Lenders may be more willing
to loan you money if you’ve saved up a considerable
amount of money for a down payment.
Live within your means. Even subprime lenders
won’t risk loaning you money for an opulent oceanfront
mansion. Think small when the time comes to look for a home.
Smaller homes often mean smaller mortgages.
We offer a wide range of services including real estate sales,
financing, and property management. Call us today for a free
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