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Mortgage Loans after Bankruptcy

May 27, 2008  |  Difficulty: Easy

Path to mortage
Even after bankruptcy, you have dreams. You may even want to take a step toward homeownership. Be reasonable when home shopping. Search for homes that you can really afford. After all, you don’t want a home payment that is too large. You could end up with another financial squeeze that leads to financial ruin. Look for houses that do not exceed 20% of your yearly income (before taxes).

Lenders typically give more than what is needed. On average, that issues out 28% of your yearly income. Keep control of the urge to take more than what is needed. When you agree to take on a loan that is 28% of your income, you are increasing the total of your monthly payments. If you are smart and accept a loan that is only 20% of your income, you are then decreasing your monthly payments, allowing room for savings, and leaving monies open for emergencies and unexpected expenses.

When the lender pre-approves you for a certain amount, search for a house that costs 15% less. This rule of thumb will help you to make a wise choice that will help you avoid future financial woes.

Don’t approach lenders with your head down. If you have taken steps to rebuild your credit, you should be proud of that. Be upfront about your bankruptcy, and showcase your hard work to re-establish a solid credit score. Being straightforward about your credit history it is always a great business practice.

The truth of the matter is, when you apply for mortgage loans after bankruptcy, the interest rates that you will receive will not be the best. However, before you can get a mortgage at all, you need to display two years of solid credit practices after your bankruptcy. This means timely payments on your credit cards and bills.

Keep in mind; Chapter 13 bankruptcy is easier to recover from than Chapter 7 bankruptcy.

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