Most people naturally assume that it is impossible to obtain a mortgage once bankruptcy has been filed. It is indeed a complicated process but not an impossible one. The main steps to obtaining a home loan after filing bankruptcy are; waiting, making sure that your credit accounts appear as included in the bankruptcy on your credit files, building up your credit again and keeping a steady job for at least two years.
If you are making current payments on a Chapter 13 bankruptcy you will be eligible for a FHA Loan if you have been making payments on time for over a year. If you filed a Chapter 7 you will need to wait at least 2 years after the discharge date before being eligible. Keep in mind that the filing date is different than the discharge date.
The first thing you need to do is to make sure that the accounts you included in bankruptcy appear as such on your credit report. This is more favorable versus accounts showing late payments or appearing in collection or charge-off status. If it’s not appearing accurately, file a dispute with each of the three agencies and send each bureau a copy of your discharge papers clearly showing which accounts were included with the bankruptcy. Disputes can be filed via mail, phone or fax. Include your name, address, social security number and the exact nature of your dispute. The agencies have by law 30 days to investigate the claim once they receive your documentation and will send you a new report with the results once they are finished.
Rebuilding your credit and obtaining positive trade lines is also very important. If you have current accounts in good standing it will be extra important to pay on time. If you do not have any accounts in good standing then you might want to open a credit cards which are secured. Make sure that the issuing bank of those secured cards report to the three agencies before you apply, otherwise it won’t do your credit any good. In order to rebuild your credit, you will need to have both installment and revolving accounts which are in good standing. Revolving accounts are credit card accounts while example of installment loans are auto and student loans. Do not apply for too much credit at one time since a high number of inquiries can affect your score negatively.
It is required to have at least two years of employment at the same place. This shows stability and an ability to pay. Keep all your work stubs and IRS documents in a place that is easily accessible in case the lender needs to verify them.
Obtaining a home loan after bankruptcy may seem like an impossible task but with time and planning, anything is possible. You may want to use the waiting period (between a bankruptcy filing and mortgage application) to re-establish your credit, dispute and correct discrepancies on your credit report and maintain steady employment. With a bit of planning and organization, it is possible to obtain your very own home even after a bankruptcy filing.
Written by Jacqueline Star: Refinance, San Diego New Homes
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