What If I Have Very Little Equity
If you have recently mortgaged or re-financed your home, you may have very little equity in it . If this is the case, there is a chance you can keep your home, and continue your mortgage payments, if you can find a way to pay this amount into the bankruptcy through other means. This is a matter you can discuss with a Licensed Insolvency Trustee for clarification.
How Long After Bankruptcy Can I Get A Mortgage
You may be able to obtain a mortgage shortly after being discharged from bankruptcy, although likely at a higher interest rate and likely requiring a co-signer. You can help improve your chances of being approved for a mortgage by saving up as much as possible for a down payment, and by showing proof of steady and reliable employment income.
You Can Get A Mortgage After Bankruptcy Heres What You Need To Know
You do need to be aware that buying a home after bankruptcy is not the same as buying a home for the first time with no issues. There are two main factors:
- How long ago was your bankruptcy discharged, or your consumer proposal completed?
- How long have you been re-establishing your credit, and how extensive is that credit?
The mortgage options available to you depend on the answers to these questions. In a nutshell, you will be looking at either a mainstream or alternative lender .
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Dealing With Your Vehicle
One of the forms you will file with the bankruptcy court is called the Statement of Intention. In this form, you tell the court what you plan to do with property that is securing a debt you owe, like real estate or a vehicle.
If you own your vehicle but are still paying on the loan, you have a few options on how to deal with it in Chapter 7 bankruptcy.
You can reaffirm the debt, keep your vehicle, and continue making payments. This means the debt will not be discharged and you will continue making monthly payments during and after bankruptcy. If you miss future payments the lender will have the right to repossess the vehicle and possibly try to collect on any deficiency between the balance you owe and the amount they get when selling the vehicle.
If you select this option in your Statement of Intention, your car lender will send you a reaffirmation agreement for you to complete and return. In some bankruptcy cases a reaffirmation hearing will be scheduled.
If you choose to surrender your vehicle, then it will be repossessed and the debt will be discharged in your bankruptcy. Filers with high car payments they can’t afford often choose to surrender their car to get out of the debt.
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.
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Chapter 13 Bankruptcy Waiting Periods
Filing Chapter 13 leads to a reorganization of debt, with scheduled payments to clear those debts . Because Chapter 13 bankruptcy includes regular payments, it does not affect your credit score as much as Chapter 7, and the waiting period for some loans is shortened.
If the bankruptcy court dismisses the bankruptcy , the waiting period is four years from the dismissal date. If the court discharges the case , the time is four years from the date you filed and two years from the discharge date.
Its important with Chapter 13 to make those payments on time and in full not doing so will anger the court and negatively affect your home-buying ability.
Specific times for specific loans after Chapter 13 include:
- For a conventional loan, four years from dismissal date. If the court discharges the case, the time is four years from the date you filed and two years from the discharge date.
- One year for a USDA loan.
- FHA and VA loans are the most generous following Chapter 13 these lenders simply require the court to dismiss or discharge your bankruptcy before you apply. FHA also will guarantee a mortgage as soon as 12 months after you file Chapter 13, provided you are making court-ordered payments on time.
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
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How To Get A Mortgage After Bankruptcy
Getting a home loan after bankruptcy is possible, but it will require patience on your part. Youll also need to take steps to increase your chances of mortgage approval after bankruptcy.
A bankruptcy will lower your significantly which signals to creditors that you are a lending risk. And it will impact your score for years to come. A Chapter 7 bankruptcy remains on your credit report for up to 10 years, while a Chapter 13 remains for up to seven years.
While you dont need to wait for a bankruptcy to disappear from your credit report to get a mortgage, you must adhere to a waiting period before applying. How long youll have to wait depends on the type of bankruptcy you file, as well as the type of mortgage you plan to get. If extenuating circumstances are present such as a divorce, job loss, illness, death of a primary earner or other unforeseeable events you may qualify for a home loan sooner.
Heres a brief overview of how long youll need to wait to apply for a mortgage after Chapter 7 and Chapter 13 bankruptcy.
|No waiting period|
Ask To Become An Authorized User
Getting someone to co-sign on a loan may be a tall order, but building your credit as an authorized user on someone elses credit card is often more feasible. Being an authorized user involves having a card in your name thats attached to another borrowers account, not your own. Youll be able to use the card for purchases without having to qualify for the account on your own meritsbut you wont be able to modify the account.
Credit card payments will show up on your credit report, so if these payments are made on time and the credit utilization rate stays low, your score will improve over time. Just make sure the credit card company reports authorized user payments to the three main credit bureaus so you have the greatest chance of increasing your score. While this isnt as impactful as other methods of increasing a credit score, it can still be helpful as part of a larger strategy.
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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:
Buying A Car After Completing A Chapter 7 Is Definitely Possible And Not Uncommon
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The longer that you can wait to make a large purchase after receiving your discharge, the better off you will be. While a bankruptcy does stay on your credit report for 7-10 years, it also erases most of the other dings on your report and allows you tostart rebuilding almost right away.
Following the above suggestions can help ensure that you get the best deal possible. Remember that buying a used car and/or obtaining a car loan that you can afford without financial strain will help to build back up your positive credit after a bankruptcy and help maintain your financial health moving forward.
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How Soon Can I Qualify For A Mortgage After Bankruptcy
Filing bankruptcy doesnt mean youll never qualify for a mortgage. One reason to file a bankruptcy case is to eliminate burdensome debt so you can get a fresh start. Some lenders, such as credit card and even certain car loan creditors, will take a chance on you right after you emerge from bankruptcy.
Mortgage lenders and guarantors want to ensure they wont compromise resources by lending to someone whos not ready for the responsibility of home ownership. Therefore, they usually wont approve loans right after the borrower gets a bankruptcy discharge. There could be a waiting period of up to 5 years.
Youll pay a higher interest rate, and the terms may not be as favorable as you like, but some for most former bankruptcy debtors. Mortgages are a different story.
During that waiting period, you must keep your new developing credit record clean. If you run into trouble, you might have to restart the clock. Every lender or guarantor has its own set of guidelines. If you are able to obtain a mortgage right away and that mortgage is foreclosed a year after your bankruptcy case is discharged, youll have another waiting period before you can qualify.
Are There Mortgage Companies That Specifically Deal With Bankruptcies
If youre not willing to wait 1 to 4 years after a bankruptcy, you might come across mortgage companies offering loans with no waiting periods. With some of these lenders, you can even apply for a mortgage just one day after a bankruptcy!
These companies are often referred to as non-prime lenders. Non-prime lenders specialize in lending to people who may not be eligible for a conventional loan or even a government-backed loan. They usually accept applications even if your credit score is in the 500 range, you have a high debt-to-income ratio, or youre just coming out of a bankruptcy.
You have to be careful, however, because most non-prime lenders charge astronomical interest rates, high fees, or would require a sizable down payment. If you just survived a bankruptcy, the last thing you want to do is to get another debt you wont be able to pay for.
Some of the popular non-prime lenders that do not have waiting periods are the following:
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Getting A Mortgage After Bankruptcy
Bankruptcy doesnt have to put an end to your dream of owning a home it could happen as early as a year after bankruptcy discharge.
The key is to take positive steps with your credit and get back your financial footing. There are a lot of balls to juggle when getting a mortgage after bankruptcy. Besides the variety of mortgages available, all with their own rules, there are also different types of bankruptcy. Both factor in to how long you have to wait before you can apply for a mortgage after bankruptcy is discharged.
Another factor is you what led to your bankruptcy, how you have handled your finances since and how you plan to handle them going forward.
Whatever the length of the waiting period, use that time to do the work that will help you qualify.
A mortgage after bankruptcy can mean higher interest rates and a more expensive mortgage. Improving your credit score after bankruptcy will help counter that.
Can You Buy A House After Chapter 7 Bankruptcy
- Can You Buy a House After Chapter 7 Bankruptcy?
If youre hoping to become a homeowner, but need to file for Chapter 7 bankruptcy, you may be wondering how doing so will affect your chances of getting a mortgage. The truth is, a bankruptcy filing wont prevent you from buying a house however, the process will require both patience and careful planning.
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Will I Ever Be Able To Buy A House After Bankruptcy
When someone here in Southern Maryland comes to me to file for bankruptcy they sometimes ask if they will ever be able to get a mortgage to buy a house.
Many people just assume they never will be able to qualify for a mortgage in Maryland after filing a bankruptcy. That just isnt true.
I always make sure to tell my clients that yes they can get a mortgage, even when they dont ask this question.
If you have received a Chapter 7 discharge you may be able to get a mortgage loan within 2 years. Perhaps even less if you qualify for certain programs that shorten the wait if had to file for bankruptcy because of a loss of employment or certain other hardships.
If you have to filed a Chapter 13 you can even get a mortgage loan while your case is pending and you are making plan payments on your debts. While the loan has to be approved by the Bankruptcy Court, you may be able to get a mortgage loan once your plan has been confirmed and you have made a year of plan payments on time.
The myth that you cant get a loan after bankruptcy just isnt true.
Bankruptcy is about being able to get a fresh start. So while it may sound strange, in most situations I find that clients are probably going to be able to get a mortgage loan quicker if they file for bankruptcy than if they dont.
Many people are surprised that when they file for bankruptcy they will get mail offering them a car loan or a credit card. This isnt as crazy as it seems.
Purchasing A House After Filing Bankruptcy
While we agree that bankruptcy can be an unfortunate experience, it does not at all mean that you wont be able to buy a home for yourself. Indeed, bankruptcy results in a poor credit score, but you can always rebuild it over time.
We understand how most people out there are concerned that once you have filed for bankruptcy, the dream to own a home goes down the drain. Well, what if we tell you that filing for bankruptcy can be your first step towards becoming a homeowner? In fact, you wont even have to wait long for the bankruptcy process to end before you can purchase a home! Speaking of this, make sure you hire a real estate agent who is well acquainted with bankruptcy attorneys.
Moving on, one thing that determines how soon you can become a homeowner after a bankruptcy filing is the bankruptcy type you have opted for. Other factors include the lender, in addition to the credit report. Before we dive in further, lets discuss the types of bankruptcies.
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Analyze Your Debts And Credit Report
Analyze your current financial position to check out where you stand now. The next thing you can do is get a copy of your credit report. If you have a previous record of your finance before filing for bankruptcy, you can use it to analyze the complete picture of your past and current financial position. Make sure to check your financial status regularly so that you can keep an eye on mistakes and correct them accordingly. It will encourage you to make further progress ahead.
Is Buying A House After Bankruptcy Possible
A bankruptcy proceeding can reduce or even eliminate your debts, but it will damage your credit report and in the process, which can affect your ability to obtain credit in the future for things such as new credit cards, a car loan, and a home mortgage.
It is possible to buy a house after bankruptcy, but it will take some patience and financial planning. It is important to check your credit report regularly to make sure everything is there that should beand nothing is there that shouldnt be. You can start to rebuild your credit using secured credit cards and installment loans, making sure all payments are made on time and in full each month.
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