7 Tips On Buying a House after Bankruptcy

Buying a house after bankruptcy

Nowadays, people file for bankruptcy for a number of reasons. Some unexpected medical bills, the loss of a job or perhaps overwhelming debt can be some of the reasons for one to file for bankruptcy. One may then start thinking if it is possible to buy a home after bankruptcy. And the answer is in the affirmative. There are many mortgage companies and online lenders out there who offer home loans for even those who have bankruptcy on their credit report. Here are 6 tips to get you started buying a house after bankruptcy

  1. The first thing you can do towards bying a house after bankruptcy is to rebuild your credit once your bankruptcy is discharged. You can do this by opening a credit card account to which you will have to make regular payments. If needed you can open a secure credit card to get the ball rolling. Another alternative is to save for a considerable down payment as the larger the cash reserve is, the better the rates you will get! Check on your credit report to make sure that all accounts linked with your bankruptcy are closed.
  2. Make sure that the payment history information is right too as the difference in one late payment can greatly increase your interest rates by a percent or more. You will want to make sure that all of the items in your bankruptcy are properly reported on your credit report. Once you improve your credit score through the repayment of the home loan, you can easily take out an equity loan on the home to consolidate any other debt you have since your bankruptcy or to use the extra cash on some business venture.
  3. Before you actually start looking for the right house loan, it is better to look at your budget. If you are going to buy a house after bankruptcy you will want to make sure you don’t have the same issues and buy to much house. Decide how much you can afford as a loan, how much you can make as a down payment, and the monthly payments you can make. With this information, you can decide how much loan to apply for, and the type of financing to opt for.
  4. However, no matter how long you intend to live in that house we suggest not going for the super low teaser rates offered with adjustable rate mortgages. You may not be planing to stay in the house very long but the possibilty that plans change may keep you there longer. Economies change and you may be behing the 8 ball if you are forced to refinance in a bad ecomomy, just to avoid the rate adjustment.
  5. Once you have an idea of the size of loan you need and you have done some work to bump up you credit score, you should start investigating the various financing companies. Lenders have little to lose when approving home loans after bankruptcy as the lender feels confident when your home serves as collateral for the loan. There are some lenders who need a certain amount of time to pass before approving for the loan. However, there are also lenders out there who will approve your loan even a day after the bankruptcy has been discharged. FHA guidlines call for a 12 to 24 month waiting period after a bankruptcy before getting a mortgage.
  6. Request free quotes and then investigate their rates. To get these quotes, you need only to furnish basic information, with no need of showing your credit report. This way your credit score is not affected. Once you get all the quotes, compare the APR for the real cost of the loan. It is no point just looking at the interest rates, as they are rather misleading.
  7. Ask if there are any; fees related to the loan as if you plan in refinancing your home, you may have to pay thousands as fees. However, these fees can be negotiated.

If you are thinking about filing bankruptcy we have written a few articles that may help you process you situation. They are titled, 8 Things You Should Know About Credit Cards and Advise to Follow for Credit Cards. If you want a bit of information on how bankruptcy will affect your credit we wrote The Impact of Bankruptcy on Your Credit.

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