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| Buying a home after bankruptcy |
It's true that most lenders will see you as a credit risk
immediately after bankruptcy, but that doesn't mean you won't be
able to buy a home. Home loans are somewhat less risky for
lenders than unsecured loans (like credit cards or personal
signature loans) because the lender will have your home as
security.
Even so, every reputable lender wants to be able to expect that
a loan will be repaid as scheduled. Fortunately, your credit
score is based more heavily on your recent track record than the
more distant past. That means that if you can start rebuilding
your credit quickly after bankruptcy, control your expenses, and
start showing a strong payment history, you won't look like such
a risk to those creditors.
Some studies suggest that within 18-24 months after a bankruptcy
discharge, you can qualify for a loan on the same terms you
would have received if you had not filed bankruptcy. In other
words, most lenders will be much more interested in |
your down
payment, the stability of your income, and the relationship
between the loan payments and your monthly income than in your
past financial troubles.
In shopping for a home, here are some general rules you should
follow:
* Shop around for everything as carefully as you do for the
house itself. Your home is likely to be the largest investment
you'll ever make, so it pays to be a smart shopper. Comparison
shop for your mortgage and your real estate broker as well as
your home. And don't base your decision solely on the interest
rate: factors like the amount of the down payment, the length of
the loan, insurance requirements, and associated costs and fees
can be just as important.
* Use a mortgage broker--an independent contractor who works
with several different lenders to find the best loan for you. A
mortgage broker has two important things that you may not:
professional expertise and direct access to hundreds of loan
products. That means a |
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mortgage broker can help you find the
most efficient and cost-effective method of financing for you.
Mortgage brokers have also pioneered the "subprime" credit
market, using innovative loan programs to allow borrowers who
have previously filed for bankruptcy to start enjoying the
benefits of home ownership.
* Look for cash-back deals. Despite what you may have heard,
real estate brokers' commissions are not set in stone. The real
estate brokerage industry is competitive, and many brokers and
real estate web sites offer cash-back or rebate programs if you
agree to work with their preferred real estate agents. You may
be able to save thousands of dollars on commissions with these
programs.
If you've filed bankruptcy and you want to purchase a home, the
bottom line is that you have to do your homework. That means
rebuilding your credit, but it also means taking the time to
research your options and get the best loan and the best terms
for your particular situation. |
If you make that investment, you
may be pleasantly surprised with your ability to buy the home
you want after bankruptcy.
(C) 2006, Total Bankruptcy, Inc. This article may be reproduced
in its entirety without limitation and without notice, except
that any reproduction must include the entire article, which may
not be modified in any way, and must include the author bio
information contained herein, including the URL and, if
published online, a live link to the URL included therein.
About the author:
Attorney Kevin Chern is President of Total Bankruptcy and former
managing partner of the largest consumer bankruptcy law firm in
the United States. Mr. Chern has personally filed thousands of
personal bankruptcy cases. His book, "Life After Bankruptcy,"
shows former debtors how to preserve their "fresh start" after
bankruptcy. Visit www.totalbankruptcy.com for more free
bankruptcy law resources, news, and articles.
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