It may be challenging to acquire a mortgage after filing for bankruptcy, given that your credit score will plummet. However, that doesn’t throw you into a permanent credit exile. There are ways around it, and you could still succeed in acquiring a loan from public and private bankruptcy lenders.
How Soon Do I Purchase a House After Declaring Bankruptcy?
The duration it takes depends on the type of bankruptcy you declared, the kind of mortgage you desire, and your bankruptcy disposition. In some cases, it can be within one to two years or as long as ten years.
How Can I Get Mortgage After Bankruptcy?
1. Commit to Building Your Credit Score
Mortgage lenders want to see your commitment to making timely payments and your debt-to-income ratio. As a result, a positive credit history increases your approval chances.
2. Consider Federal Housing Authority Loans
FHA-backed loans are typically lenient on poor credit scores and bankruptcy. Also, consider providing documents supporting your move to declare bankruptcy, such as proof of job loss, to accelerate your approval.
3. Get a Consigner
Banks typically consider loan applications when someone is willing to consign. However, each bank works differently, so checking with the institution on how they view consigners will give you a better picture. Similarly, make your payments in time, lest you implicate your consigner.
4. Stay Away From Subprime Lenders
It may be tempting to resort to subprime loans (lenders giving loans to people with poor credit records), but you should strictly avoid them. They typically have numerous hidden charges, exorbitantly high interests, and inflated payment terms that will worsen your situation.
5. Be Ready To Answer Lender’s Questions
First, you may consider explaining your bankruptcy issues in a letter and submit it during your application. Similarly, be available to answer any questions that your lender may have. A quick and honest response to the lender’s concerns may increase your chances of approval.
Like any other major financial crisis, bankruptcy has a road to recovery and doesn’t mean final economic doom. For instance, the Consumer Financial Protection Bureau reported that people who declare bankruptcy typically have higher credit scores compared to those struggling with monetary challenges silently. However, it calls for you to be intentional, committed, and diligent to fight your way back to the top.