Mortgages After Bankruptcy
Easier Than You'd Expect
by Kevin Adelsberg
Many American consumers fear that they won't be able to get a good mortgage if
they claim bankruptcy. In fact, more lenders than ever will work with homeowners
who have fallen on hard times and want to rebuild their credit. Before you start
looking for a new home, cover these bases:
Give yourself time to rebound. Whether you had to turn to bankruptcy because of
a divorce, a medical emergency, a job loss, or a problem spending habit, give
yourself a little time for the air to clear before house hunting. Mortgage
lenders will want to see that you have put some space between you and your money
troubles. You can use the time to start saving for your down payment.
Fix the root problem first. Figure out where your money troubles started and
patch up the leaks. If you wound up in court because you couldn't control your
credit card spending, resist the urge to rack up new debt after your bankruptcy
discharge. Mortgage lenders won't help you if you appear to be repeating the
same bad cycle.
Pay your rent on time for two years. Do whatever it takes to get your rent to
the landlord on time for twenty-four consecutive months. If you miss a month,
the clock starts again from zero. Therefore, chop out anything in the budget
that could set you back from your dream of a fresh mortgage. If your landlord
doesn't report to any of the major credit bureaus, that's okay. Just get a dated
receipt for every rent payment, which you can use to prove your case to a
Save up a twenty percent down payment. With all the no-money-down mortgage
offers you see on television, it sounds almost antiquated to stash a huge chunk
of money into savings. In reality, a solid down payment proves to a mortgage
lender that you're serious about overcoming your past problems with money. A
large down payment will also reduce your monthly mortgage payment and save you
from paying high priced default insurance on your loan.
Work with a live human being. Don't let a computerized scoring system stand
between you and your mortgage. Because mortgages are secure debts, many lenders
stand ready to compete for your business, despite your past credit history.
Mortgage lenders, especially those with branch offices in your neighborhood, can
perform a "manual underwriting" process where they examine documentation like
your rent receipts and your bank statements to show that you have truly overcome
your past problems.
Kevin Adelsberg is a writer for
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