Filing for bankruptcy is, without a doubt, one of the most stressful financial decisions a person can make in their life. While it helps to resolve debts, it also leaves a tremendous impact on the individual’s credit report as a result. This impact, unfortunately, can be quite enduring and can make it harder to get loans and other lines of credit that you need to move forward in life. One major life event that can be curtailed is the purchasing of one’s very own home. But it is not impossible to realize your dream of home ownership if you have filed for bankruptcy in the past.
In this article, we’ll explain how even those who have filed for bankruptcy can get the mortgage loan they need to buy a home.
First, Tend to Your Credit:
Yes, bankruptcies exist on a person’s credit report for six years. However, this does not mean that there is nothing to be done to improve one’s credit situation. Start by requesting copies of your credit report from the three credit reporting bureaus. Each individual is entitled to a free copy of their credit report from each bureau, once per year. Take advantage of this fact so that you can see the same information that lenders will see when they look up your information!
From there, it’s time to get to work. Make sure to go over the information in your credit report – including the basics, such as your name and address – to ensure that everything is correct. If you find errors, an unfortunately common occurrence on credit reports, you can dispute them and have them removed from your report.
In addition to cleaning up your credit report, it’s time to start building credit once again. Take out a secured credit card. This type of credit card will help you to rebuild your credit, as long as you make your payments on time each month toward this debt. Lenders like to see that an individual can manage several different types of debt, and a secured credit card is a great place to start.
Now, Start to Plan:
You will need to have the funds for a down payment before you pursue getting a mortgage from any lender. Make a budget with this goal in mind and stick to it, while keeping in mind your debts and other financial obligations. It can take some time to get the 5% to 20% required for a down payment (depending on if you want to utilize a conventional mortgage or a high-ratio mortgage), so don’t feel bad if this is a slow process. Home ownership isn’t a race.
Once you’ve got the money for your down payment available to you, it’s time to reach out to an industry expert who can point you toward lenders. A mortgage broker is an experienced real estate professional who has connections with numerous lenders of all different types. Your broker may even have access to lenders who specialize in dealing with those with poor credit and/or past bankruptcies.
Filing for bankruptcy, in some lenders’ eyes, can actually make you a more reliable client because you have no debts that haven’t been properly managed. Work with a broker to help establish a relationship with such a lender and the dream of home ownership won’t seem so far off.