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Can You Obtain AMortgage After A

Bankruptcy Discharge?

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Bankruptcy is a household word for many Americanstoday. In fact, there are more than 1 millionbankruptcies filed every year. This used to mean thatthe fate of a borrower looking for a mortgage wasdoomed. It would be necessary to wait several yearsbefore applying for a mortgage and even then it wasoften difficult to find an approval that one could afford.Today it is much easier to obtain a mortgage after filingfor bankruptcy as long as you have cleaned up yourcredit history and showed that you have turned over anew leaf. Taking the necessary steps to rebuild yourcredit will help you build a new financial life in the eyesof the lenders.



Clean up your Credit Report

The first step is ensuring that your bankruptcy is in factdischarged. This will be reflected on your bankruptcypapers as well as on your credit report. If yourbankruptcy is still showing as active, you will be unableto apply for a mortgage. After your bankruptcy it isbest to obtain a copy of your credit report. This willallow you to ensure that the bankruptcy is reporting asdischarged as well as that any debts that wereincluded in the bankruptcy show that they wereincluded. If you still have active debts showing, now isthe best time to have them reported correctly in orderto allow your credit to start fresh.



Start Applying for Credit

After filing for bankruptcy it can feel like your credit isdoomed, but you might be pleasantly surprised at thenumber of companies that will offer you a secured creditcard or even an installment loan. These loans will come ata higher price or have restrictions on them that you didnot have before, but they are the best way to startbuilding your credit back up. A few ways that you mightsee more restrictions include a higher interest rate on yourcredit card or loan or you might have to take a securedcredit card, which means that you must put down adeposit on the card which will also be your credit limit.This protects the credit card company in the event thatyou were to default on the loan.



Pay Other Debts Down

Not every debt that you have might have been included inthe bankruptcy. If you owed any taxes or student loans,you likely still owe those debts. Try to work on payingthem down as much as you can. If you cannot afford morethan the standard payment, make sure that the paymentsare always timely. One late payment after yourbankruptcy discharge can really ruin your credit scoreeven more, making the time that you must wait to applyfor a mortgage even longer. Lenders want to see that youhave become more responsible with your money, whichmeans no late or missed payments after the bankruptcy.



Save your Money

You are going to need a sizable down payment when youare ready to apply for a new mortgage. The higher thedown payment that you have, the more likely it is that yourloan application will be approved. If you are going to applyfor an FHA loan, you will need at least 3.5 percent of thesales price to put down on the home in addition to theclosing costs. If you are going to try to apply for aconventional loan, the more money you have to put down,the better. The minimum down payment for those withgood credit is 5 percent, but that percentage typically goesup for those borrowers with a history of a bankruptcy. Themore assets that you have, the more favorable you will lookto the lender.



Keep Consistent Income

Mortgage companies will look for compensatingfactors when evaluating your mortgage application.If they see a bankruptcy, they will need somethingthat will make up for that negative mark on yourcredit report. This could be a significant amount ofassets in the bank or the fact that you have held thesame job for the last 5 or more years. The morestable your income looks and the longer that youhave held your job, the more it helps your mortgageapplication in the long run.



Applying for a Mortgage

There are many loan programs that you can apply forstarting two years after your bankruptcy was discharged.The program with the least restrictions is the FHA loan,which is backed by the government. Many borrowers areable to obtain this type of loan much sooner than anyother type of loan following a bankruptcy. Make sure toevaluate your options carefully to ensure that you areentering into a mortgage that you can comfortably affordnot only now but well into the future in order to avoid theneed to file bankruptcy again.



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Justin McHood is Americas MortgageCommentator and has been providingMortgage commentary for over 10 years.

INFORMATION PROVIDED BY: JUSTIN MCHOOD

MORTGAGE COMMENTATOR

Information Originally Published: February 2, 2015 BLOWNMORTGAGE.COM LENDER HOTLINE: 888-581-5008

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