In today’s challenging economy, many consumers are finding themselves looking into the option of bankruptcy. The loss of a job, overwhelming debt and unforeseen medical bills are just a few factors that are leading many people to make this difficult decision. This can be a very hard and stressful time in someone’s life. Some people often wonder if after erasing debt and having a new start, if they are able to one day buy a home. The answer to this question is most definitely. There is no doubt that bankruptcy does have an impact on the ability to borrow money after the settlement, but getting a bankruptcy home loan can be completed in as little as 18 to 24 months if creditworthiness is able to be rebuilt.
Filing for bankruptcy is not a road block in property ownership; it is a reality for millions of consumers you have already filed. Mortgage companies as well as online lenders are offering home loans to people who have bankruptcy on their credit. The mortgage industry has developed special packages and terms for people who have once filed bankruptcy. There are even some lenders who will approve a home loan the day after a bankruptcy is discharged.
Today, the Federal Housing Administration’s policy for being able to qualify for a home loan is more flexible than some traditional mortgage lenders. The FHA allows a consumer’s credit to be repaired if:
- it has been 24 months since the bankruptcy.
- any tax liens are paid or arrangements have been made through a repayment plan.
- any judgments are paid.
- it has been three years since a foreclosure or a deed-in-lieu has been cleared.
Buying a home after filing for bankruptcy puts more emphasis on two factors needed to be approved for a bankruptcy home equity loan: down payment and income verification. There is very little for a lender to lose if approving a home equity loan after bankruptcy for someone who has filed bankruptcy. With a home as collateral, a lender feels most confidant in approving the loan and many times soon after it is completed.
If you are someone who has bankruptcy on your record and would like to apply for a home loan, there are many programs and products that will fit your needs. Lenders are able to approve a loan quickly and also provide you with good terms on the loan. Some lenders do require that a particular amount of time pass before being able to approve a home loan after bankruptcy, while there are other lenders who will approve one right away. Most lenders want consumers to wait at least 2 years from filing bankruptcy before they will consider providing a mortgage loan. After waiting the 2 years, financing should be relativity easy and 100% financing is very likely. This can be achieved if all monthly payments have been reported to credit bureaus as being paid on time since the bankruptcy.
If you want to apply for a home loan sooner than 2 years after the discharge of a bankruptcy, you will need to have an almost perfect payment history since then. A down payment may also be needed if you are not waiting out the 2 years. Even if you are able to provide between 3% and 5% as a down payment, that could be just enough to help you get approved for the loan.
When applying for a home loan, it is understandable that mortgage companies want to be reassured that a borrower is on a responsible and safe financial track. Some lenders like to see three things when they are considering providing a loan to someone after a bankruptcy:
1. 2 years of paying bills on time.
2. An income that is steady.
3. A down payment towards the loan.
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