Can you secure a mortgage after bankruptcy?

| May 8, 2020 | Uncategorized | 0 comments

It only takes one unexpected event for you to be confronted with difficult financial times. The sudden onset of a medical condition, the loss of a job, or even something like a divorce can leave you reeling. If you’re here reading this blog, then you probably know that personal bankruptcy can provide you with very real debt relief, but you might still have reservations, especially with regard to what your life will look like post-bankruptcy.

One concern you might have pertains to whether you’ll be able to secure a mortgage after bankruptcy. Many people think that bankruptcy will financially ruin them forever, but this simply isn’t the case. Bankruptcy really does provide a fresh financial start, which means you might be able to get a mortgage much quicker than you think.

Before talking about what you can do to work your way towards a mortgage, though, we have to note that acquiring a mortgage post-bankruptcy isn’t as easy as getting a credit card. Credit card companies are usually willing to take a risk on those who recently emerged from bankruptcy, although with higher interest rates, but mortgages are a different ballgame. So, consider taking these actions to increase your odds of efficiently obtaining a mortgage after your bankruptcy:

  • Check your credit score: Do this to ensure that your debts are actually marked as having been discharged in bankruptcy. If they are not, then you’ll need to follow up to make sure your credit report and your score accurately reflect where you’re at financially.
  • Work on rebuilding your credit: We’ve discussed this in previous posts. Try to keep a steady job. Stay up to date on accounts that remain active after your bankruptcy. Seek out new lines of credit, but don’t overdo it. Keep account balances low and request that your favorable repayment history be reported to credit agencies.
  • Get prequalified: By seeking prequalification, you know where you stand in lenders’ eyes and what their concerns are. This can save you a lot of time and frustration as you house hunt, and it can also provide guidance as far as how to continue to improve your standing with lenders moving forward.
  • Know your mortgage options: FHA and VA loans may be your best options. If you pursued Chapter 7 bankruptcy, then you might have to wait for two years before seeking approval, but Chapter 13 filers generally don’t have to wait that long. For FHA mortgages, a Chapter 13 filer may even be able to secure a mortgage before completion of their bankruptcy repayment plan. For other types of loans, though, like conventional mortgages, you’ll probably have to wait for a few years and demonstrate that you’ve rebuilt your credit before you’re able to access them.

All of this is to say that filing for bankruptcy doesn’t destroy your hope for the future. In fact, you can have a bright future ahead of you. You just need to take that first step down the path toward the fresh financial start you deserve.