Is An Fha Loan Right For You
The only government-guaranteed loan is an FHA loan from the Federal Housing Administration. An FHA mortgage can be risky because you lose your house in foreclosure if you cannot make the mortgage payments.
However, it can be less risky to you since the government will pay your mortgage lender if you cannot make the payments. It will not add to your debt, but you will have a foreclosure on your new credit report on top of the bankruptcy filing.
You can get an FHA loan when:
- Two years have passed since you filed for Chapter 7 bankruptcy
- You have made one year’s worth of on-time payments in your Chapter 13 repayment plan
- The lender agrees to approve the loan
- The bankruptcy court agrees you can take on more debt before you have good credit again
When You Are Ready To Buy A House Talk To Us
Now that you know how to go about getting a house, we hope that you find success. Of course, once you have managed to secure financing for a home, you will need to look into protecting your investment with a suitable homeowners insurance policy.
Working with an independent agent in our network can help you save money by ensuring that you are getting the home coverage you need at a competitive rate. We wish you the best of luck in finding and purchasing your new home. Share your experiences with us in the comments.
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Ensure Accuracy Of Information On Your Credit Report
You need to cross-check and ensure that all the personal and financial account information written on your credit report are true and accurate such as:
- Personal information
- Account information
- Information relevant to your former spouse that should not be included in your report
- Correct annotations for all your closed bank accounts
- Any account that is not included in your bankruptcy filing listed as part of it
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Keep Your Mortgage Payments Current
Its also important to understand that a consumer proposal does not affect secured debt like your mortgage. You will be required to keep making your mortgage payments regularly and on-time. Failure to do so would result in your mortgage lender acting to seize your home due to mortgage arrears.
Moreover, under current laws, a lender is not allowed to cancel a mortgage just because you have filed for bankruptcy or a consumer proposal, if your payments are on time.
Work Toward Better Debt
To have the best chance of getting a mortgage, youll want a history of different types of debt. After a few months of making payments on your secured credit card, you should apply for an unsecured card so you can show responsibility across multiple credit lines.
Both are a type of revolving debt. Next, you can apply for an installment loan, like a car loan. The key is to buy only what you can afford and pay it off at the end of every month.
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How Do Bankruptcies Affect A Joint Mortgage
If one person files for bankruptcy, that can have an impact if you both are on the mortgage. There are instances where one persons bankruptcy can cause issues with keeping the home, even if more than one of you is on the mortgage. In order to be fully apprised of what can happen, talk to your attorney.
Qualifying For A Mortgage After A Consumer Proposal
Because a consumer proposal allows you to lower your monthly debt payments, often quite significantly, now is the time to start building some savings. Consider creating a budgeting plan and direct your savings in debt payments towards a goal like saving for a down payment towards a new home and/or having a stable emergency fund. You should also make it a habit to pay all your bills in full and on-time to build a solid credit history during and after your consumer proposal filing.
Traditional lenders will look for the following in order to be approved for a prime quality mortgage after filing a consumer proposal:
- A two-year timeline after discharge, over which you have re-established a new, better, credit rating
- Two or more new credit facilities and
- Approximately $2500 in new credit.
While this process requires some patience and discipline, its in your best interest to build a large down payment and consistently pay all your bills. This way, you can rebuild your credit rating to qualify for a mortgage at an affordable rate. You can learn more about what you need to do to qualify for a mortgage after filing for insolvency.
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What Happens When I Need To Renew My Mortgage
In most cases, you should be able to make a mortgage renewal after bankruptcy as long as the mortgage payments are up to date. Most banks would prefer to have you sign the mortgage renewal and continue paying it off over a longer period of time, than to foreclose on it at that point and risk losing all the future profits plus an additional amount of money by selling your house at a discounted foreclosure price. Always ask your lender for specific information as policies and procedures can vary.
Discuss Your Options With A Detroit Bankruptcy Attorney
We offer free consultations for people to explore their debt resolution options and ensure that they will be able to reach their long-term goals, such as home ownership. We will carefully review your current circumstances and consider your future financial goals before making an informed recommendation.
Call us today at 866-261-8282 to speak to an attorney over the phone or set up an in-office appointment at any of our six Michigan law offices in: Detroit, Ann Arbor, Warren, Southfield, Dearborn and Flint.
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Although Chapter 7 Bankruptcy Gets Rid Of Your Personal Liability On Your Mortgage The Lender Can Still Foreclose If You Stop Paying
Updated By Cara O’Neill, Attorney
Filing for Chapter 7 bankruptcy will wipe out your mortgage loan, but you’ll have to give up the home. Why? Your lender’s right to foreclose doesn’t go away when you file for bankruptcy . So, if you want to keep the house, you must continue paying your mortgage payment.
Can You File Bankruptcy And Keep Your House
5 minute read â¢Upsolve is a nonprofit tool that helps you file bankruptcy for free.Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we’ll never ask you for a credit card.Explore our free tool
In a Nutshell
Filing bankruptcy and keeping your house is possible. Whether you can file bankruptcy and keep your house depends on your unique circumstances. Hereâs what you need to know.
Written byAttorney Andrea Wimmer.
Homeownership has long been part of the âAmerican Dream.â If youâre overwhelmed with debt, donât let your fear about losing your home stop you from getting bankruptcy relief. Especially if paying your creditors is putting your ability to pay your home mortgage at risk.
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Where Will I Live If I Lose My Home Through Bankruptcy
Stop worrying and asking, Will I lose my house if I file bankruptcy? Even if you do, all hope is not lost! You can still have a new home even after bankruptcy.
Some programs are available to help you on your road to recovery. State governments and nonprofits have home-buying assistance programs that you can tap into. These include the following:
- Federal Housing Administration loans
- Veteran Affairs loans
- United States Department of Agriculture loans
- State housing finance agencies
Buying A House After Your Bankruptcy Case Will Probably Come Easier And Quicker Than You Think
By Carron Nicks
Eliminating debt by filing a bankruptcy case can make it easier for you to afford a home purchase, but it will also impact your ability to get a loan. So don’t plan on qualifying for a loan the day after your bankruptcy dischargemost lenders won’t be willing to take a chance on you immediately.
Even so, there’s a good chance you’ll qualify for a mortgage loan sooner than you think. Learn how the following will impact your ability to buy a house:
- your post-bankruptcy credit score, and
- qualification requirements of government and private lenders.
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Chapter 7 Vs Chapter 1: The Difference
Most people tend to file bankruptcy under Chapter 7 because its easier and the preferred option for people with few assets and no income. For some that still have income, Chapter 13 is a better option to catch up with their payments and keep their valuable assets.
In Chapter 7, its when you claim that you dont have any disposable income to pay off your debt. So, if you want to eliminate your debt, your assets will be seized and sold off so that you can pay a portion of your debt.
In Chapter 13, you have the option to keep all your assets, regardless of their value. Its when you enter into a debt repayment plan, so as long as you can keep up with the payment to your creditors, your properties are safe.
Its normal to fear losing your home after you file bankruptcy. Your house, though, can be exempt depending on how much its worth if you file Chapter 7 bankruptcy. However, you need to be current in your mortgage payments to keep your house.
The exemptions vary from state to state. In some cases, you can keep your house and some of your assets because their equity is lower than the bankruptcy exemption amount, which well explain more in the following sections.
Getting Approved For A Mortgage After Bankruptcy
1. Check and correct ALL your credit reports
This is paramount. There are 3 main credit reference agencies lenders use , and the information on each can differ greatly. Often we have borrowers come to us and the info on their credit files dont match the date of the bankruptcy discharge and the settlement dates of their credit accounts they once held.
This is often due to the creditors not updating their records correctly. As a result, many creditworthy borrowers are declined because it appears as though they have outstanding balances and/or defaults that happened since the bankruptcy. Getting this info updated on all three reports is crucial.
2. Check your eligibility
Make an enquiry with one of the experts and allow them to establish which lenders would consider an application as things stand if you would qualify now, great. If not then they will advise you on what changes youll need to improve your credit and become more eligible, for instance correcting your report, waiting until your bankruptcy discharge is older, or perhaps saving a little extra deposit.
3. If youre not eligible now, rebuild your score until you are
There are many ways you can rebuild your credit score and show mortgage lenders that you can be financially responsible and meet your monthly payments. Some ways include:
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Respond To Lender Inquiries
Once you submit your preapproval application, the rest is in your lenders hands. Your lender will review your income, assets, debt and credit to see if you qualify for a mortgage. If you seem like a good candidate, your lender will send you a preapproval letter. You can use your letter to start shopping for a home.
Your lender might need to contact you to ask questions about items on your credit report. This is especially common after an adverse financial event like bankruptcy. Be honest and respond to your lenders inquiries quickly to improve your chances of approval.
What Are Va Loans
The VA loan program, administered by the U.S. Department of Veterans Affairs, offers low-cost loans to veterans and active military personnel. Qualified borrowers arent required to make down payments, some of the closing costs are forgiven and borrowers dont have to pay mortgage insurance.
There are several requirements for those who have gone through a bankruptcy if they want to get a VA loan.
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Can I Get A Mortgage After Bankruptcy
Filing for bankruptcy is a serious undertaking some turn to when debt becomes overwhelming. It’s an action you can take to relieve some or all of your debt and stop collection activities like lawsuits and repossessionas long as you’re willing to pay the substantial price of having this mark on your credit for seven to 10 years, hurting your ability to obtain loans and credit cards.
If you’ve filed for bankruptcy or are planning to do so in the near future, you may be wondering how it will affect your ability to get a mortgage down the road. Here’s the truth:
While it is possible to get a mortgage after bankruptcy, it can be quite challenging.
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.
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Check Your Credit Report
Lenders look at your credit reporta detailed report of your credit historyto determine your creditworthiness. Although bankruptcy filings can remain on your credit report for up to 10 years, it doesnt mean you have to wait 10 years to get a mortgage.
You can speed up the process by making sure your credit report is accurate and up to date. Its free to check: Every year, you are entitled to one free credit report from each of the big three Equifax, Experian, and TransUnion.
A good strategy is to stagger your requests, so you get a credit report every four months . That way you can monitor your credit report throughout the year. One of the best credit monitoring services could also be useful in this endeavor.
On your credit report, be sure to watch for debts that have already been repaid or discharged. By law a creditor cannot report any debt discharged in bankruptcy as being currently owed, late, outstanding, having a balance due, or converted as some new type of debt . If something like this appears on your credit report, contact the credit agency right away to dispute the mistake and have it corrected.
Other mistakes to look for:
- Information that is not yours due to similar names/addresses or mistaken Social Security numbers
- Incorrect account information due to identity theft
- Information from a former spouse
- Outdated information
- Wrong notations for closed accounts
- Accounts not included in your bankruptcy filing listed as part of it
Tips To Earn A Mortgage Approval After Bankruptcy
If youre trying to get a mortgage after bankruptcy, the first thing youll need to do is get your credit score back on track. Theres no quick fix for rebuilding your credit after a bankruptcy, but your most recent actions have a more significant impact on your credit score than past negative events.
Keep these tips in mind to help your chances at mortgage approval.
Focus on improving your credit. Do what you can to improve your credit before applying for a mortgage after bankruptcy. Your credit score wouldve taken a hit, but you can improve it by paying your bills on time and keeping your credit utilization low. If you plan on getting a mortgage after a Chapter 13 bankruptcy, its crucial to follow your repayment plan as agreed.
Your credit score will play a significant role in your loan costs. Heres a quick look at how a difference in credit score can impact a $250,000 conventional loan with a 30-year term.
| $190,483 | $440,483 |
As the table illustrates, a 740 credit score can save you more than $68,000 over the life of a 30-year loan.
Apply for credit cautiously. While you may qualify for other forms of debt, such as credit cards or an auto loan, soon after bankruptcy, be cautious about taking on additional debt if you anticipate applying for a mortgage.
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Dismissal Vs Discharge Of Your Bankruptcy Claim
When debtors declare bankruptcy, they are asking the Bankruptcy Court to take over their finances. The immediate impact of the declaration is that the court issues a temporary stay of collection activity. That means foreclosure or auto repossession efforts as well as phone calls and letters must stop while the case is being resolved.
In some cases, the court will dismiss Chapter 7 claims if it determines to repay creditors some or all of what they are owed. The determine the debtors income is sufficient, given the cost of living and average incomes in your area. If your bankruptcy declaration is dismissed, you end up back where you started.
If the court accepts a claim for relief, the Chapter 7 filing results in the liquidation of the debtors assets and the debts being discharged. That means, that the debtor is no longer a debtor and can begin with a fresh start and much worse credit. With a Chapter 13 bankruptcy, the discharge is usually granted 4 years after filing, as repayment plans typically last 3 5 years.
