How to buy a Home after Bankruptcy?

Recently filed bankruptcy papers? You may again want to possess a home and start wondering as how to get a fresh mortgage loan, as getting a mortgage loan has become a very tedious process for any person who has been declared bankrupt.

Though the process of getting a mortgage loan with a bankruptcy track record behind you is very difficult, you may still have hope of securing a loan in future.

A recent concept of Subprime lending is in vogue and such subprime lenders are in fact helping individuals with poor credit in buying home after bankruptcy.

Subprime lending is slowly establishing its roots, as there are increasing number of people with bad credit who are looking for home financing. However, you may have to take into account few reasons such as:

Increasing your credit rating. As you make your payments regularly, there is a good chance of increasing your credit rating and once your pre-payment penalty is done, you will be in a position to refinance your credit loan presumably for a lower interest rate.

Wait for a period of 2 to 3 years. You will be having a much easier time once your bankruptcy time has passed around 3 years and by that time you may even be eligible for a mortgage loan for a lesser rate of interest.

Owning the asset instead of renting - If you renting a home and paying rent for the asset, you can try out alternate plan of buying a home and use your rental payments toward paying the mortgage loan installments.

Over a period of time, you will be in a position to own a home with the money that you would have paid out as rents.

Once you own your house without any liability over it, you can even think of taking an equity loan over the asset and square off your other long-term liabilities.

Please be aware that you cannot discharge taxes and student loans in a bankruptcy and you can pay off these liabilities through the equity loan.

It is very normal for persons to buy a new home or a car or do some renovations, etc., after bankruptcy. You may even venture out to taking a bigger liability, but it is better you consider few of the following facts before that leap:

The Pre-payment penalty - Once you sign your mortgage papers, you have no option but to pay this penalty which is usually about 6 months worth of house payments and lasts from 2-3 years. In any case you do not have sufficient money to pay these, you eventually end up in losing the house.

The Two-Year Mark - It is better to wait for 2 to 3 years after your bankruptcy discharge. Getting mortgage loans are easier after the initial 2 to 3 years and you will be able to get a loan without a pre-payment penalty and with a small down payment.

Borrowing Too Much - The most commonly committed mistake is taking a loan that one cannot afford to repay. And you and I are no exception.

Better do a self - Introspection and decide on the home and the loan amount which you can afford comfortably and that can match your income levels. A conservative approach is best suited if you have any reservations over your income earnings.

Bankruptcy is not the end of your credit life. You need not despair as there are so may avenues and opportunities for you to get a home through mortgage loan and you can still prove your credit worthiness without much difficulty.


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