Do I Have Other Options For Secured Debts
You may be able to keep the collateral on a secured debt by paying the creditor in a lump sum the amount the item is worth rather than what you owe on the loan. This is your right under the bankruptcy law to redeem thecollateral.
Redeeming collateral can save you hundreds of dollars. Since furniture, appliances and other household goods go down in value quickly once they are used, you may redeem them for less than their original cost or what you owe on the account.
You may have another option if the creditor did not loan you the money to buy the collateral, like when a creditor takes a lien on household goods you already have. You may be able to ask the court to avoid this kind of lien. This will make the debt unsecured.
What To Look For In A Home Loan After Bankruptcy
Its important not to set your hopes too high for a home loan after bankruptcy. Dont expect low interest rates right from the start, and be ready to have certain home loan features made unavailable to you.
Another thing to consider is to avoid making any home loan applications too son and getting rejected. Every rejected home loan application shows up on your credit report, making potential lenders even warier of you in the future. To avoid this, you can look for a specialist lender with a history of giving home loans to discharged bankrupts and you may need to speak to a lenders mortgage manager to find this out.
Canstar can help you compare your options for home loans, so that you can find the right place to look for a home loan after bankruptcy.
Can I Change My Mind After I Reaffirm A Debt
Yes. You can cancel any reaffirmation agreement for 60 days after it is filed with the court. You can also cancel at any time before your discharge order. To cancel a reaffirmation agreement, you must notify the creditor inwriting. You do not have to give a reason. Once you have canceled, the creditor must return any payments you made on the agreement.
Also, remember that a reaffirmation agreement has to be in writing, has to be signed by your lawyer or approved by the judge, and has to be made before your bankruptcy is over. Any other reaffirmation agreement is not valid.
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Raise Your Credit Score
Mortgage lending requirements are changing in large part due to the coronavirus . Folks who wouldve qualified for a loan just a few weeks ago are now running into trouble. This presents yet another obstacle for borrowers who went through bankruptcy.
Do your future self a favor and use this time to repair your credit. This means paying down high-interest debt , becoming current with your bills, and disputing any errors on your credit report. The sooner you improve your credit score, the sooner you can acquire that coveted mortgage pre-approval letter.
How Can I Buy A House After Bankruptcy
The good news is you can still buy a new home even if you declare bankruptcy. It may be a long process and require extraordinary effort, more than the average prospective homeowner.
Legally, you have to wait until the judge dismisses your bankruptcy before getting a loan. Still, later on, it overall depends on how fast you can get your finances back in order.
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Getting A Home Loan After Bankruptcy
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There are specialist bankruptcy home loan lenders who offer home loans to discharged bankrupts. Since discharged bankrupts naturally have a bad credit history, the lenders willing to lend to them have stricter terms and conditions than lenders offering other types of home loans, such as:
- Stricter set of eligibility requirements
- Require initial deposits that are about 20% higher than normal
- Higher interest rates
- Higher fees
Obviously, paying more for a home loan than normal is not an ideal situation for anyone, especially someone who is already on tight finances, when home loans are already an expensive long-term debt.
Nevertheless, discharged bankrupts may be more likely to get a more reasonable interest rate on their home loan if they can prove that:
- The bankruptcy will not be repeated
- They have a good repayment history since
- They have a stable employment history
- They have saved for a deposit of 20% or more
Is A Conventional Loan Right For You
A conventional loan can come from three organizations called:
- Ginnie Mae: Government-owned loans such as FHA loans, VA loans, and USDA loans
- Fannie Mae or Freddie Mac: Private loans or government-insured loans
You cannot get a lender to approve Fannie Mae or Freddie Mac loans if:
- You filed Chapter 7 bankruptcy in the last four years
- You filed Chapter 13 bankruptcy and got a discharge within the last two years
- Your Chapter 13 bankruptcy was dismissed less than four years ago
Sometimes, the waiting period can be shortened for major life changes, called extenuating circumstances. Things like a divorce, losing your job, or illness or accidents that result in large medical debt are beyond your control. They can reduce your waiting period after these circumstances.
Some banks or private loan officers can choose to underwrite a loan with less strict rules and waiting times, or more strict rules. That always depends on the bank’s practices.
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How Foreclosure Prolongs A Mortgage Waiting Period
Sometimes a bankruptcy isnt the only financial setback a potential mortgage borrower is dealing with. The bankruptcy may have been preceded by foreclosure on a mortgage.
Having both a foreclosure and bankruptcy may prolong the mortgage process more than just a bankruptcy, and may add other requirements.
The following chart shows the length of time after a foreclosure a potential borrower may apply for a loan:
How Long Will Bankruptcy Stay On My Credit Report
The results of your bankruptcy case will be part of your credit record for ten years. The ten years are counted from the date you filed your bankruptcy.
This does not mean you cant get a house, a car, a loan, or a credit card for ten years. In fact, you can probably get credit even before your bankruptcy is over! The question is, how much interest and fees will you have to pay? And, can you afford your monthly payments, so you dont begin a new cycle of painful financial problems.
Debts discharged in your bankruptcy should be listed on your report as having a zero balance, meaning you do not owe anything on the debt. Debts incorrectly reported as having a balance owed will negatively affect your credit score and make it more difficult to get credit.
You should check your credit report after your bankruptcy discharge and file a dispute with credit reporting agencies if this information is not correct.
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Discuss Your Options With A Mortgage Professional
If you do wish to purchase a home, and you have a bankruptcy or consumer proposal in your past, the most important recommendation I have is not to rush into anything. Same goes for re-financing a mortgage after bankruptcy. Talk to a knowledgeable mortgage professional who is experienced in helping people get a mortgage after bankruptcy. They will help you to understand and evaluate your options, and figure out which one is best for you.
If youd like to do more reading about credit, check out my articles on Establishing Credit and Repairing Bruised Credit. And Im always happy to answer any questions you might have for me, with no obligation. Please dont hesitate to get in touch with me if youre in the GTA and youd like to talk about your own situation.
I wish you happy home buying!
How Many Years After Bankruptcy Can You Buy A House
If youve gone through a Chapter 7 bankruptcy, you need to wait at least 4 years after a court discharges or dismisses your bankruptcy to qualify for a conventional loan. Government-backed mortgage loans are a bit more lenient. You need to wait 3 years after your bankruptcys dismissal or discharge to get a USDA loan.
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Mortgage After Bankruptcy With An Alternative Mortgage Lender Or B Lender
An alternative lender will work with you as early as one day after your bankruptcy discharge, and with little or no re-established credit. However, in exchange for this flexibility, what they will look for is the following:
1. Your down payment will need to be at least 20% of the purchase price of your home. If you have 25% down, or more, that will give you more options. In Mississauga, Etobicoke, and the Greater Toronto Area, this can be a sizeable chunk of cash, so youll want to be prepared.
2. Your costs will be higher with a B lender than with a mainstream lender. First, your interest rate will be a bit higher how much higher depends on the big picture of your overall financial situation, how large your down payment is, and how good your re-established credit is. You can expect to add at least one percentage point over mainstream rates, possibly more. Second, you can expect to pay a lender commitment fee typically around 1% of your mortgage value similar to the Genworth or CMHC mortgage insurance fee mentioned above. If your down payment is more than 20%, you might be able to add the commitment fee to your mortgage rather than paying this out of pocket, but this is up to the lender.
Keep in mind that your alternative mortgage lender or B lender is exactly that: an alternative, or a stepping stone to get you where you want to go.
How Long After Bankruptcy Can You Buy A House
The waiting period to buy a house depends on whether you filed Chapter 7 or Chapter 13 bankruptcy, and the type of loan you seek. Waiting periods after Chapter 7 is discharged vary from two to four years. After Chapter 13 is discharged, some federal loans are available immediately, though a conventional loan requires a two-year waiting period.
The first step in qualifying for a home loan after bankruptcy is to have the bankruptcy judge discharge your case. Then comes the patience test, and the timeframe is determined by the type of bankruptcy you have and the type of loan you desire.
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Types Of Bankruptcy: The Best And The Worst
There are two ways to file: Chapter 7 bankruptcy and Chapter 13 bankruptcy. With Chapter 7 bankruptcy, filers are typically released from their obligation to pay back unsecured debtthink credit cards, medical bills, or loans extended without collateral.
With Chapter 13 bankruptcy, filers have to pay back their debt. However, the debt is reorganized and a new repayment schedule established that makes monthly payments more affordable.
Since Chapter 13 filers are still paying back their debts, mortgage lenders generally look more favorably on these consumers than those who file for Chapter 7, says David Carey, vice president and residential lending manager at New Yorks Tompkins Mahopac Bank.
A bankruptcy attorney can help determine if Chapter 7 or Chapter 13 makes the most sense for your specific situation. Unfortunately, both Chapter 7 and Chapter 13 bankruptcies will adversely affect credit scores. But dont give up, hopeful home buyer.
Do I Have To Reaffirm Car Loans Home Mortgages
If you are behind on a car loan or a home mortgage and you can afford to catch up, you can reaffirm and possibly keep your car or home. If the lender agrees to give you the time you need to get caught up on a default, this may be a good reason to reaffirm. But if you were having trouble staying current with your payments before bankruptcy and your situation has not improved, reaffirmation may be a mistake.
The collateral is likely to be repossessed or foreclosed anyway after bankruptcy, because your obligation to make payments continues. If you have reaffirmed, you could then be required to pay the difference between what the collateral is sold for and what you owe.
If you are up to date on your loan, you may not need to reaffirm to keep your car or home. Some lenders will let you keep your property without signing a reaffirmation as long as you continue to make your payments. Sometimes lenders will do this if they think the bankruptcy court will not approve the reaffirmation agreement.
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How Can I Be Sure To Keep My House After Chapter 13
While you will be allowed to keep, or even purchase a house or other property after you file for Chapter 13 bankruptcy in Wisconsin, there are steps you will be required to take in order to retain or keep that ownership. You must:
- Pay your bankruptcy payments in full
- Pay your bankruptcy payments on time
- Never miss a payment
Debt reorganization is intended to assist you to in paying off your debt, while maintaining your property, though it can be challenging to follow the repayment schedule.
Many Wisconsin residents who have filed for Chapter 13 bankruptcy, find keeping up with the new payment schedule is still too challenging. If you share this concern, you may want to convert your bankruptcy filing from Chapter 13 to Chapter 7.
If this sounds like an option you might like to pursue, it is in your best interest to discuss your specific circumstances with a proven bankruptcy attorney in order to get the clearest picture of your options before deciding your next stepsespecially if you hope to convert from Chapter 13 to Chapter 7 and keep your house in Wisconsin.
If you would like assistance as you consider filing for Chapter 13 in Wisconsin, or if you would like to learn more about converting your Chapter 13 bankruptcy to a Chapter 7 filing, contact a knowledgeable bankruptcy attorney to discuss your options.
S To Improve Your Credit Score After A Bankruptcy Or Foreclosure
Each person’s situation is unique. So is each recovery from failed homeownership. Complicated formulas, weighted factors and human judgment all play into the process and explain why it’s impossible to forecast how long it will take. Your rate of improvement depends on your credit score before the bankruptcy or foreclosure, how much your score dropped because of the bankruptcy or foreclosure, the amount of new debt you’ve taken on since then and how much time has passed since the bankruptcy or foreclosure.
It takes time to rebuild your to the point where lenders will trust you again. You can make the most of that time by adopting these healthy financial habits:
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Bankruptcy Follow These 6 Crucial Steps To Mortgage Approval
When things go wrong, as they sometimes will, when the road youre trudging seems all up hill, when care is pressing you down a bit, rest, if you must, but dont you quit. ~ Anonymous
Those words perfectly describe todays topic. If youve been through a recent bankruptcy, you know all too well the financial challenges that exist after. One of the biggest challenges is getting a mortgage.
So what do you do? Is it possible to emerge from bankruptcy and buy your next home? Of course it is!
But there are a few steps you need to follow first. If you want the shortest line to mortgage approval success, follow the steps outlined below.
But first, lets take a quick look at time frames. How long before most lenders consider you as an applicant? I wrote a blog post on this very topic earlier this year. You can read the entire post at Bankruptcy: How Long After Can You Apply For a Mortgage. Basically, lenders usually want you to be discharged for 2 years with re-established credit. This usually means 2 trade lines of combined $2500-$3000 reporting for 24 months with no derogatory information.
If your loan-to-value is low, and your income is stable with good job tenure, some lenders will consider approving the loan before the 2 year mark. Heres what you can do starting tomorrow to get lenders to consider approving your loan post bankruptcy.
How Do I Know How Much Equity I Have
You can calculate your homes equity by taking the value of your house, and subtracting the amount you owe on your mortgage and the currently owed property taxes from this value.
House value amount owed on mortgage currently owed property tax = Equity
In most personal bankruptcies, the home must be sold so that this equity value can go to your creditors.
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Dont Overlook Additional Fees And Expenses
Typically fee includes appraisals, inspections, title processing, and escrow. You have to pay these fees as front expenses, or they turn into your loan. If the prices merge with your loan, the costs may impact your monthly payments and the total interest you pay over the loans lifetime.
Since you are taking a mortgage after bankruptcy, have a thorough look at if the extra fees are affordable for your future goals. You have struggled hard to rebuild your credit to buy a house. And you dont intend to go down under an interest rate of a jumble of fees that you cannot afford comfortably.
You can use the online calculator to search about the impact of your location, credit rating, length, and type of loan on your interest rate, as well as predictable monthly payments.