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How long before you file for bankruptcy is the best time to purchase a home?

March 12th, 2010 | | Tags: , | 4 Comments | |

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4 Responses to “How long before you file for bankruptcy is the best time to purchase a home?”

  1. Brian H Says:
     March 12th, 2010 at 9:05 am

    The answer is, "it depends."

    With some lenders, as long as your bankruptcy remains on your credit reports you will be denied credit.

    The good news is, there are many "normal" lenders who are willing to work with you after bankruptcy. You just need to know where to find them.

    It’s NOT about working with lenders that are convenient for you. It’s about finding lenders that will work with you without taking advantage of your situation.

    Each lender sets their own "credit guidelines." What are credit guidelines? They are simply the minimum requirements you must have in order to qualify for credit with that lender.

    The three common credit guidelines for most lenders who work with people after bankruptcy are:
    (1) The amount of time you have since your discharge
    (2) How you pay your bills after discharge
    (3) Your FICO® credit scores.

    Time will heal.

    Mortgage companies are pretty forgiving when it comes to lending money to someone who’s filed bankruptcy. In fact, after bankruptcy, it’s actually easier to get a mortgage on a new home than get approved for an unsecured credit card.

    As long as your middle FICO credit score is 580 or above you will qualify for mortgage financing with no money down…just maybe not at the interest rate and terms you want. (This assumes you haven’t had a foreclosure in the last 24 months and you have a good payment history since your discharge.)

    To get better terms and a lower interest rate, you need a higher middle credit score. A middle score of 600 will give you a lower interest rate and better terms. (This assumes you haven’t had a foreclosure in the last 12 months.) A middle score of 620 or above opens up even better options once you have two years after discharge.

  2. Melissa O Says:
     March 12th, 2010 at 9:05 am

    After 2 years.

  3. foreclosurefish Says:
     March 12th, 2010 at 9:05 am

    It really depends on the situation and the specifics of the bankruptcy situation. Whether it was a Chapter 7 or Chapter 13 will make a slight difference, as well as if the bankruptcy was discharged or dismissed by you or another party.

    Qualifying to buy a home after bankruptcy will either be pretty easy or a total nightmare, depending on the state of your other credit, as well. If you establish good credit and remove negative information from your credit report, you might be able to qualify for a competitive mortgage within a year after filing. But if you still show poor use of credit, you may have to wait nearly 2-3 years to qualify for a mortgage, and even then you might not be approved.

    So focus on repairing your credit now, and in a year or so, check your credit scores and see what kind of mortgage you can be approved for. Not to mention the fact that the larger of a down payment you have, the easier it will be to qualify for a new loan.

    And if you are just paying cash to purchase the home, then credit won’t be a deciding factor at all. But relatively few people do this, of course.

    You’ll have to prove to a lender that you deserve a new mortgage, so the more financially responsible you are starting right now, the easier it will be to convice a mortgage company that they should lend you money.

    There are a lot of resources available online that will help you repair your credit. Don’t be taken in by companies that offer to help you do this — most of the information and tactics they use are available online for free or nominal charges. Many people end up sending hundreds or thousands of dollars to credit repair companies and end up with no real reward for the effort.

    ForeclosureFish
    http://www.foreclosurefish.com/

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  1. Life After Bankruptcy Discharge  March 12th, 2010

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