Every year, hundreds of thousands of Americans declare bankruptcy. This not fun statistics makes you wonder whether there are any financial opportunities for a person after that event. This is a rather delicate matter that people don’t like to discuss, but bankruptcy victims also often need financial assistance like everyone else, especially when buying a real estate property on credit.
So, let’s see if there is a possibility to take a mortgage after bankruptcy.
- Do not rush to try to get a mortgage
After your bankruptcy case has been closed, do not rush to take a mortgage immediately. You have to take a few steps, which we will discuss further, but for now give yourself time to put your affairs in order. Most lenders will not even consider your application for a mortgage earlier than 2 years after the completion of your bankruptcy procedure, and those who are still willing to consider such an opportunity, are unlikely to offer you good conditions. Mortgage is a fairly large loan for many years, which ultimately will result in a large amount. If at the same time the lender offers you tough conditions, then it may be difficult to pay the mortgage, and you will be exposed to a high risk of adverse outcome.
You will have to examine the proposals of the lenders and make a choice in favor of one of them only by carefully weighing all the details of the proposal and their financial capabilities. In addition, these two years you will have to abandon new loans and large purchases.
- Your bankruptcy must be discharged
What is a bankruptcy settlement? This is a court decision to close your bankruptcy case. If the trial is still ongoing, your previous creditors may still have claims on your assets or file a new claim against you for damages compensation. No new lender will contact such a borrower to avoid future problems or counterclaims. Completion of your bankruptcy case will mean that your debts are all written off and no one else can give you financial claims.
How to find out if your case is closed or not, there are several sources of information. You can ask the court clerk in charge of your case, or wait for an official letter from him with a notice of the completion of your case. In addition, you can use Public Access to Court Electronic Records or PACER to find out about the status of your bankruptcy.
- Carefully review your credit report
After you make sure that your bankruptcy procedure is completed and the case is closed, have a thorough examination of your credit report. This is a document that lenders will consider when reviewing your mortgage application, so before you apply, you must understand the condition of your credit report. 20% of credit reports contain errors that can and should be corrected. You will also need to make sure that all of your previous loans that you have already paid are marked as completed there.
- Improve your credit
Given that it is not advisable for you to take out new loans within two years after the completion of your bankruptcy, you do not have many options for improving your credit, but you have them. You can try small loans and timely repayment. Moreover, try to make payments on loans not just on time, but even before the due date and in the amount exceeding the stipulated amount. Using credit cards, do not allow your balance to grow on it, use only a small part of the credit limit provided.
In addition, lenders will pay attention to how you work. You should not change work during this period in order not to spoil lenders’ impression about you as a borrower. Also, do not forget about your tax obligations and together with all the measures mentioned above, you will significantly increase your chances of approving your mortgage.
- Show lenders that you are a reliable borrower
To make lenders willing to risk issuing a loan to you after bankruptcy, you will need to convince them that they will get their money back in due time. You can do this with other loans. Taking a small loan in installments without a credit check, paying it on time, not allowing a single delay, you will help lenders to ensure your reliability. You can also use a secured credit card for this purpose.
- Make your initial payment as big as you can
The more you can make an advance payment for the house, the more trust you will have. You are more likely to approve a mortgage and offer softer conditions. Open a special account for this purpose immediately after the end of the bankruptcy procedure.
Bankruptcy is always an unpleasant life stage that you just have to survive, but life does not end after it. Although your credit and your reliability as a borrower drops dramatically, but with the help of the right actions and the right credit behavior you can gradually improve your situation. Your finances, as your credit rating too, will gradually improve if you follow the tips outlined above.
You can find more information in our financial blog, or you can ask questions to our experts.