Friday, October 11, 2013

Louisville Kentucky VA, FHA, USDA, KHC , Fannie Mae Mortgage Guide: Buying a Home after Bankruptcy:

Louisville Kentucky VA, FHA, USDA, KHC , Fannie Mae Mortgage Guide: Buying a Home after Bankruptcy:

Louisville Kentucky VA, FHA, USDA, KHC , Fannie Mae Mortgage Guide: Buying a Home after Bankruptcy:


By Daniel Duffield

In the face of bankruptcy, buying a home may seem like an impossible endeavor. Many believe that low credit scores will entirely prevent future qualification for mortgage loans. Although not the best of situations, filing for bankruptcy is not the end of your attempts to secure a loan. Recovery is far from impossible; all it takes is some patience and some good advice.

Many people have probably warned you that buying a home after bankruptcy is virtually impossible. They have probably told you that your low credit score will hinder you from qualifying for any mortgage loan. Well, get their voices out of your head because they are wrong. Buying a home after bankruptcy is not only possible, it has become easier too. And if you know where to look and what to look for, the possibilities could be endless.
The good news:
Banks and home mortgage lenders do not just look at your credit score when they evaluate your application. They already know you are short in this aspect, because you have already applied for bankruptcy. When attempting to acquire a home loan to buy a house after bankruptcy, they are looking for are two other things which you have more control of: income verification and ability to make a down payment.

How can I recover from bankruptcy and Buy a Home?

Although your credit score will take a substantial hit from bankruptcy, many other factors come into play when banks and mortgage lenders consider giving out a loan. In order to buy a home after bankruptcy, lenders will need to know your credit history; however, they take into consideration your post-bankruptcy activity and with some smart decisions and responsible financing, you should be able to acquire a loan.

What do I do after filing for bankruptcy to acquire a home loan?

Though filing for bankruptcy is not the ideal situation to be in, it is an opportunity for a fresh start; believing and practicing this idea is the best way to show a lender you are ready for another chance. After a bankruptcy, the most important steps to take are re-establishing your credit and, in doing so, proving your reliability.

How can I re-establish my credit?

Rebuilding your credit is much simpler than most people would expect. For starters, you need to find out why you ended up filing for bankruptcy in the first place. If you were unable to make payments on time, you will need to find the root of this problem and correct it before starting anew; the worst possible course of action following a bankruptcy would be to repeat the same mistakes and tarnish your credit once again.
  • Make sure that your credit report is current
After a bankruptcy, you need to verify that your accounts and credit reflect your current situation. If anything is not up to date or if you notice any errors on your credit, make sure to resolve these issues before you start trying to rebuild your credit.
Apply for a credit card
Applying for a credit card will help you to establish a new credit history and prove to a lender that you can manage your finances responsibly. Getting a secured credit card can help even more as it restricts your spending to the amount on deposit in your bank account.
  • Installment loans
While you recover from bankruptcy, installment loans can help you to recover your credit score while you are unable to seek traditional loans. These loans are paid back in installments, however…
  • Make payments on time!
It is critically important to make your payments on time after filing for bankruptcy. Since you already have a history with bankruptcy, late payments will greatly diminish your chances to secure a loan. Not to mention you could put yourself deeper in debt by missing payment deadlines.

What do I do after I have established credit?


  • Prove your income with steady employment
If you are able to prove that you’ve become more responsible in managing your finances, your chances of buying a home will significantly increase, and you could possibly even get 100% financing. Having a steady income and a respectable employment record is the best way to demonstrate that you are responsible and capable of making the most of a second chance.
  • Save for a down payment
While you manage your income, you should save money to put toward a  down payment. Aiming to put 10% down should improve your chances with a lender when the time comes to secure a mortgage.

How can I raise my down payment?

  • Cash in 401k
If you are unable to save as much as desired for a down payment, you can cash out a 401K or other investment and later repay yourself with a second or third mortgage (home equity loan/home equity line of credit) once the mortgage loan has closed.
  • Down payment assistance programs
Another option to consider is a down payment assistance program. These programs aid the seller of the house in helping you with the down payment. Some down payment assistance programs even come in the form of grants, such as the AmeriDream Downpayment Gift Program, which provides assistance of up to 10% of a home’s price. In addition, the “Newsong Down Payment Assistance Program” can also help by allowing you to use money from a “Newsong fund,” which will be later refunded as the seller contributes back the proceeds of the sale for other homebuyer’s use.
  • Borrow from family
When all else fails, you can opt to borrow the down payment required from your relatives. Once you take out a second or third mortgage and financed the house, you can pay them back in full. However, remember that some lenders have regulations about where the down payment is coming from. Be sure to disclose to the lender that your money is coming from relatives before you close the deal.

Where should I look for a lender post-bankruptcy?

When taking out a loan, post-bankruptcy or otherwise, it is always a good idea to shop around for the lowest rates. For borrowers that have filed for bankruptcy or undergone a similar dent in credit score, lenders will offer loans with higher interest rates than to borrowers with impeccable credit. That is why it is especially important to find a lender that is willing to offer the lowest possible interest rates; these small differences in rates can cost or save you thousands of dollars in the long run. If you want to shop around for the best rates, visit our Lender411 Find a Lenderpage. It is easy to use and will conveniently display all lenders in your vicinity. Give it a try today and let us help you get back on your feet after a difficult bankruptcy.