Can You Take a Mortgage Post Bankruptcy?

If you want to take a house loan, your lenders look at different factors, including bankruptcy status. Bankruptcy does not negate your plans to buy a house. Nonetheless, a few challenges could make mortgage acquirement stricter. This blog explores the nitty-gritty of mortgage acquirement post-bankruptcy.

Time Taken to Qualify for a Mortgage Post-Bankruptcy

The waiting period depends on which consumer bankruptcies you filed. For instance, the chapter 7 plan remains on your credit report for a decade . Nonetheless, most lenders can offer you a loan one to four years after you file for bankruptcy. However, if you lacked control over the bankruptcy, lenders can reduce the required time.

Chapter 13 is more favorable if your repayment arrangement is solid, and you would want to buy a house sooner. The report remains on your credit report for seven years. After that, the waiting period depends on whether the court discharges or dismisses your debt. You will wait two year if the court discharges and four years if the court dismisses your bankruptcy.

Steps for Mortgage Application After Bankruptcy

The steps towards a mortgage post-bankruptcy are not so different from the normal process. Nonetheless, you must be more vigilant in notifying your lenders that you are in a position to repay the loan. Read on to discover a few steps to guide you on what to do.

Examine Your Credit Report

First, understand what the credit report entails to improve your credit score. Not all reports are perfect, so check for errors that could reduce your score. Typical errors include false identity, address mistakes, and incorrect account details.

You can attain one annual free credit report from Experian, Transunion, or Equifax. You can disagree with errors and confirm that your bankruptcy gets removed from the report in good time.

Rebuild Your Credit Score

Lenders use your credit score to determine your ability to repay. A higher score earns you more trust from lenders. Bankruptcy reduces your score, but you can rebuild the credit with forbearance and a proper plan.

You could also get a secured credit card to build your score and become in better standing with lenders. The log of activities on your secured card passes on to credit agencies to rebuild your score. Also, avoid debts you cannot service and pay your utility bills in good time.

Get an Explanatory Letter

Often, bankruptcy results from mitigating circumstances or poor financial choices. Tell your lenders if yours stemmed from uncontrollable circumstances like a disease or job loss. Lenders are often more lenient if the reasons behind the bankruptcy were uncontrollable.

A bankruptcy explanation letter is not mandatory but improves your standing with lenders. You could also state what you have done to prevent the reoccurrence of bankruptcy. Other factors demonstrating sound financial management post-bankruptcy include cash reserves and a favorable debt-to-income ratio.

Request Preapproval

Preapproval is not a mandatory step of mortgage approval, but a preapproval letter sheds light on different aspects. For instance, the lenders let you understand how much money you qualify for. You can then narrow down your search to fit your budget.

With a preapproval letter, you notify sellers that you can get the money to buy the property. A good credit score comes in handy before you apply for preapproval. So, give yourself enough time post-bankruptcy to reestablish your score before you apply for a house loan.

Patience and proper financial plans are paramount for getting a house loan post-bankruptcy. Then, you can commence your dream of homeownership. If you still have questions or want advice on what to do after a bankruptcy, contact the lawyers at Custer, Custer & Clark LLC .