Mortgage Approval After Bankruptcy

Everyone assumes bankruptcy automatically means you bid farewell to credit and that’s not necessarily true; you can get approved for a mortgage after going through a bankruptcy but there will be conditions you need to meet.

First of all, anyone that files for bankruptcy needs to have a plan to restore their credit. This is a tool for you to restart your financial future yet many people let this opportunity slip away.

Yes, bankruptcy is damaging to your credit however, lenders look at this as a clean slate and you are really in a better position than most individuals because you can build up a new reputation. Keep in mind, there are many reasons people file for bankruptcy and creditors take this into consideration.

Bankruptcy often reduces credit scores by 100 to 150 points and if you have filed a Chapter 7, it will normally takes2 or 3 years to attain scores required to qualify for a new mortgage.
If you have filed a Chapter 13, you will not qualify for a mortgage until you fulfill all your scheduled payments; the newest bankruptcy laws prohibit debtors from obtaining credit during the payment phase, unless you can get court approval.
Individuals who file mortgage bankruptcy to stop foreclosure and later lose their property might not qualify for another home loan for at least 5 years. Foreclosed homeowners should consider investigating alternative finance options such as if a seller will carry or lease purchase option agreements.

There are government lending programs such as FHA that have more lenient credit guidelines to help you qualify for a mortgage, even with a prior bankruptcy. If you have a steady job with solid income and have been working to pay off debts lenders will definitely look at the “new you” as a reliable potential homeowner.

You can also use your current home, as well as other assets to use as equity to convince a lender that you should qualify; and always remember, the less money you want to borrow, the less risk you are to a lender so choose a moderately priced home to start with.

The real lesson here is that bankruptcy should not be taken lightly; you must be absolutely sure that it is the best option for you because your credit will take a few dings and you will have to work to show that you are once again credit worthy.