Declaring a bankruptcy does not automatically mean that you will lose your house or your mortgage.
Beside the bankruptcy, there are many other factors that must be taken into account.
After filing a Chapter 13 Bankruptcy, a person can still own a house.
Chapter 7 vs.
Chapter 13 Also, a five-year repayment period is set up and this could give the owner the opportunity to repay debt within that time frame.
Whereas filing a Chapter 7 Bankruptcy will actual find the borrower to the mortgage and the home in spite of the bankruptcy filing so the owner can remain in the house.
Buying a House after Bankruptcy If you have declared either type of bankruptcy but had no home on the line at the time of filing, then getting a home loan can be pretty tough because your creditworthiness is at its lowest point.
Keep the following considerations in mind if you need to buy a home after having filed for bankruptcy.
FICO Credit Scores Most lenders require a FICO credit score of at least 620 in order to qualify for a home loan.
A bankruptcy filing can pull that score down to around the low 300's.
A FICO score of 780 or higher will make better interest rates and more favorable repayment terms available to a prospective home owner.
At lease this makes it clear to what a prospective home owner must strive in order to land a home loan.
Rebuilding Credit Ratings Your first step will be to start improving your credit score.
Do this by taking out small loans and paying them back on time and on target.
Some borrowers have even taken out loans, put the loan amount in a separate account, and geared automatic payments from that separate account toward the loan.
Doing this a couple of times goes a long way to rescuing bad or bankruptcy credit situations.
Federal Housing Administration, Veterans Administration Loans that have been offered under FHA are insured and it could be fairly easy to negotiate a loan modification to lower the interest rates and the monthly payments.
People who have filed Chapter 13 will have to wait for two years before they can consider buying a home again.
Federal Loan Programs Make It Easier Under FHA, they must make twelve payments in full for consecutive months to purchase a house.
Terms and conditions may be less stringent as well.
Even though they have filed bankruptcy before, Veterans who are still eligible, also have to wait two years before they put themselves on the market to buy a home.
Debt-Income Ratios No matter what bankruptcies may have been filed, lenders will pay careful attention to an applicants debt to income ratio.
Lenders do not want to lend unless your loan payments will amount to less than a third of your income.
Other areas of your debt obligations, such as credit card debt, should be apportioned favorably as well.
Tough Task Landing a loan after declaring a bankruptcy is not going to be a cake walk.
The smudge will stay on your credit records from 7-10 years.
Any alternative to bankruptcy should be considered since it is such a damaging step.