Bankruptcy and Buying a House - Is it
Smart to Buy a House after Bankruptcy?
Each year, millions of people file bankruptcy as a means of
erasing their consumer debts. While this approach may relieve stress, a
bankruptcy is damaging, and will hang over your head for the next ten years.
Still, it is possible to overcome bankruptcy. The key is making smarter
financial and credit decisions. With this said, some people choose to purchase a
home after a bankruptcy. Here are a few pointers to consider when buying a home.
Reasons to Delay the Buying Process after Bankruptcy
If you consult with mortgage or financial experts, they will
likely discourage you from buying a home following a bankruptcy. After your
bankruptcy is discharged, there is a black cloud that looms over your credit
report.
When any prospective lender reviews your report, they will be
notified of your recent or past bankruptcy. In some instances, this justifies an
immediate denial. On the other hand, there are lenders eager to help you
establish or rebuild your credit. Thus, they will approve a loan request.
Nonetheless, the penalties are steep.
Higher mortgage rates can be anticipated when purchasing a
home after bankruptcy, especially if you have not established other credit
accounts. Mortgage lenders consider two factors: credit scores and credit
reports.
Although a bankruptcy appears on your credit report, having a
high credit score will increase your odds of getting a comparable rate.
Unfortunately, if you buy immediately following a bankruptcy, you will not have
the opportunity to boost your score.
Reasons to Buy a Home after Bankruptcy
Lenders will approve mortgage loan applications one day
following a discharge. Therefore, it is possible to get a home after a
bankruptcy. Buying a home is perfect for rebuilding credit. Moreover, it is the
quickest way to increase your credit score.
After a bankruptcy, the average person has a credit score
below 600. Good credit consist of credit scores 650 and above. Maintaining
current mortgage payments will gradually increase your score. After two years of
regular payments, you will have established a good payment history. Hence, you
may qualify for a low rate refinancing, which may lower your mortgage payments.
By
Carrie Reeder
Links to other useful web-sites |
|
| | 
