Filing for bankruptcy can deal a huge blow on your credibility as a borrower. Since it will stay on your record for a while, it’s understandable that you’d be reluctant to take out considerable loans. However, it’s important to remember that bankruptcy isn’t permanent in your books. In fact, it’s still possible to buy a home if you know the right steps to take.
Determining Your Eligibility to Get a New Mortgage
The type of bankruptcy you filed will depend on the kind of loan you can apply for. While you can technically apply for any mortgage loan, you should consider the imposed waiting period you need to observe.
For a Chapter 7 Bankruptcy, you’d need to consider that this will stay on your record for ten years. On the other hand, a Chapter 13 bankruptcy will put a negative mark on your credit score for seven years at most. You’ll have a considerably lower credit score during this period, but that doesn’t mean you’ll be incapable of applying for home loans.
FHA loans, in particular, are easier loans to get approval for if you recently filed for bankruptcy. This is because you don’t have to stick to a long waiting period before applying for one if you filed for a Chapter 13 bankruptcy. Additionally, there are much fewer requirements you have to present.
In this article, we’ll go over the steps you should take to get a loan after being bankrupt.
Step #1: Repair Your Credit Score
Inevitably, trying to get back up after filing for bankruptcy will be an uphill battle. However, you need to brace through your financial challenges to get your credit score back to favorable levels. This is necessary to reach your respective lender’s minimum credit score requirements.
Getting a secured credit card, paying down your debt, and paying your current bills on time are excellent ways to improve your credit score. These actions show your viability as a borrower to lenders. Lower levels of debt and consistent payment of dues will considerably impact boosting your credit score.
Step #2: Explain Your Financial Situation
While lenders will typically look at the hard figures of a lender’s credit profile, that doesn’t mean you can’t explain your finances’ state. Since you can’t hide a bankruptcy mark on your record, you should be ready to explain your situation. It will also be helpful to detail how you’re attempting to improve your financial conditions.
Step #3: Get Pre-approval
After having your financial documents in order, it’s time to apply for mortgage pre-approval. It’s a letter you will receive from a lender detailing how much money you can secure for a specific loan rate. This will help you consider what homes you can buy in the market and count as your bargaining chip when haggling prices with realtors.
Step #4: Choose the Right Lender
After you’ve chosen the right home for your loan, you’ll now have to work with your lender to finalize your loan terms. You may need to present additional information concerning items on your credit report. Otherwise, this step should complete your need to get a mortgage after surviving bankruptcy.
Never look at bankruptcy as the end of the road for your financial wellness. Sometimes, it’s a necessary financial strategy to take, especially if you’re on the verge of being swallowed by debt. Thankfully, you can still get the right loans if you choose dependable lenders for your expenses.
At paloRATE, it’s our team’s goal to help borrowers overcome their financial roadblocks. Through our quality service, we deliver honesty, integrity, and competence when developing the right loan plan. If you want to work with the home loans in Bellevue, contact us today at (206) 719-269!