Each year, millions of people file bankruptcy as a means of erasing
their consumer debts. While this approach may relieve stress, a bankruptcy
is damaging, and will hang over your head for the next ten years.
Still, it is possible to overcome bankruptcy. The key is making smarter
financial and credit decisions. With this said, some people choose to
purchase a home after a bankruptcy. Here are a few pointers to consider when
buying a home.
Reasons to Delay the Buying Process after Bankruptcy
If you consult with mortgage or financial experts, they will likely
discourage you from buying a home following a bankruptcy. After your
bankruptcy is discharged, there is a black cloud that looms over your credit
report.
When any prospective lender reviews your report, they will be notified
of your recent or past bankruptcy. In some instances, this justifies an
immediate denial. On the other hand, there are lenders eager to help
you establish or rebuild your credit. Thus, they will approve a loan
request. Nonetheless, the penalties are steep.
Higher mortgage rates can be anticipated when purchasing a home after
bankruptcy, especially if you have not established other credit
accounts. Mortgage lenders consider two factors: credit scores and credit
reports.
Although a bankruptcy appears on your credit report, having a high
credit score will increase your odds of getting a comparable rate.
Unfortunately, if you buy immediately following a bankruptcy, you will not have
the opportunity to boost your score.
Reasons to Buy a Home after Bankruptcy
Lenders will approve mortgage loan applications one day following a
discharge. Therefore, it is possible to get a home after a bankruptcy.
Buying a home is perfect for rebuilding credit. Moreover, it is the
quickest way to increase your credit score.
After a bankruptcy, the average person has a credit score below 600.
Good credit consist of credit scores 650 and above. Maintaining current
mortgage payments will gradually increase your score. After two years of
regular payments, you will have established a good payment history.
Hence, you may qualify for a low rate refinancing, which may lower your
mortgage payments.
View our recommended
Mortgage After Bankruptcy Lenders.
