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Buying a Home – Bankruptcy

March 27th, 2009 by Jessica Lambert

by Jessica Lambert

Read this article if you are considering bankruptcy before buying home.

If you are in a position where you are thinking of filing bankruptcy but want to eventually buy a house, it is possible! Although a bankruptcy will reduce your credit score by 200+ points, the damage is not ever lasting.

After your bankruptcy you’ll want to focus on achieving a perfect payment history with three or more credit references. Additionally, you will typically need to wait two years from the discharge or dismissal of the bankruptcy in order to be considered for a mortgage loan.

It helps to get letters from people with whom you have been paying bills on time with (telephone, or other utilities, for example). You can never have too many good reports of your enhanced credit responsibility, especially after a bankruptcy.

It is a great idea to keep your current job, and ideally the same job from the time of your bankruptcy. Remember, you are trying to prove your consistency and reliability as much as possible.

When your credit lines begin to come back, do not use too much of what you have available. Keeping the charges you make to a minimum it will be a strong signal to lenders that you mean business.

One warning I always stress to people is to make sure whatever was causing the problems which led you to consider filing bankruptcy, in the first place, has been fully resolved.

Bankruptcy is a devastating event. You will close the doors on pretty much any credit for a period of time, not to mention the flags it leaves will remain on your credit history for 10 years. Recurring credit issues become much more difficult to deal with when you have filed bankruptcy in the past.

Once you have made all the appropriate post-bankruptcy steps then you are ready to start your search, keep the following tips in mind.

Be very skeptical of sub-prime lenders that will charge insane amounts for processing fees, pre-payment and other fees. Most of the time I say, if it sounds excessive or unfair, it probably is.

Make sure you obtain 3 or more quotes from different lenders. This helps flush out the best deal.

Do not get frustrated, get creative! If you still need extra cash for a down payment, consider borrowing it form a friend or relative. After closing, you can often apply for a second or third mortgage up to the value of the house to repay. (Make sure to discuss any creative ideas with your lender)

First-time-buyers. Usually there are sate-operated first-time buyers programs that can help you get started. A short web search can work wonders.

Make sure you’ve exhausted all other options short of bankruptcy before you take this step. Having creditors harassing you can magnify problems that you might normally handle without considering a major bail-out.

In conclusion, examine your credit history and scores for errors and opportunities. Negotiating toward a clean credit report has prevented many from filing for bankruptcy. Whatever you decide, take action today ” you will be excited you did!

About the Author:

For a free credit consultation call 1-866-246-7311. Or for free credit repair letters or to learn how to remove bad credit from debt collectors such as Midland Credit Management.

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