Purchasing Your Home ‘Post’ Bankruptcy

There’s no doubt about it. This past year has been and continues to be a financial challenge for many of us. Being faced with job loss or downsizing, mounting medical bills, increasing credit card debt and a host of other circumstances have led to some filing for bankruptcy. If you or someone you know has lost a home during this time, you may then start thinking of the possibility (or the lack thereof) of purchasing a home after bankruptcy. The answer is YES ! There are many mortgage companies and online lenders out there who offer home loans for even those who have bankruptcy on their credit reports.

The process is not easy, as you will have to rebuild your credit once your bankruptcy is discharged. You can do this by opening a credit card account to which you will have to make regular on time payments. Another alternative is to save for a considerable down payment in cash because the larger the cash reserve is, the better the rates you will receive. Read your credit report with a fine tooth comb for accuracy and to make sure that all accounts linked with your bankruptcy are closed.

Make sure that the payment history information is accurate, as the difference in one late payment can greatly increase your interest rates by a percent or more. Once you improve your credit score through the repayment of the home loan, you may be able to take out an equity loan on the home to consolidate any other debt you’ve accumulated since your bankruptcy or to use the extra cash on a business venture.

Before you a start looking for the right home loan, take a real look at your budget. Decide how much you can afford as a loan, how much you can make as a down payment, and the monthly payments you can meet sufficiently. With this information, you can decide on a loan amount to apply for, and the type of financing to opt for. If you are able to, this is the best time to purchase a home. The federal government is offering an up to $8,000 first time homebuyer tax credit. As long as you occupy the home for three years, the money does not have to be repaid. There is currently a bill in the Senate that would increase the tax credit to $15,000…talk about incentive, but I digress.

If you intend to live in your future home for more than seven years, it is better to find a 30 year fixed rate mortgage. Just pay it off as if it’s a 15 year mortgage, as it saves money. To get an idea of the type of loan to get, you could use a mortgage calculator for estimations. Once you have an idea of the type of loan you need, you should start investigating the various financing companies. Lenders have little to loss when approving home loans after bankruptcy as the lender feels confident when your home serves as collateral for the loan. There are some lenders who need a certain amount of time to pass before approving for the loan. However, there are also lenders who will approve your loan even a day after the bankruptcy has been discharged.

Request free quotes and then investigate their rates. To get these quotes, you need only to furnish basic information, with no need of showing your credit card. This way your credit score is not effected. Once you get all the quotes, compare the APR for the real cost of the loan. Looking only at the interest rates can be rather misleading.

Ask about any fees related to the loan as if you plan on refinancing your home. You may have to pay thousands in fees. However, these fees can be negotiated. In closing, remember to do yourself due diligence and don’t fret. Your government wants you to be a homeowner, so don’t let a few setbacks keep you from achieving your goals.

By Golda Smith

Golda is a single mom of two children. She is the CEO of The Smith Group, a real estate investment company that acquires properties in emerging markets. If you have questions for this mogul mom email her at [email protected]