Life After Bankruptcy: Yes, You Can Get a Mortgage!

It’s possible to put your credit back on track and qualify for a mortgage, even after bankruptcy.

Sometimes bad financial situations happen to good people and bankruptcy is the only way out. But it’s not all doom and gloom! It’s possible to put your credit back on track and qualify for a mortgage, even after bankruptcy.

Here’s how:

• Find the right lender. Unlike mainstream lenders, non-conforming lenders will usually provide financing after a bankruptcy, if you can demonstrate that you’re now a good credit risk and have sufficient income. I can help you with that.

• Wait a couple of years. Most lenders won’t approve a mortgage until two years after bankruptcy.

• Have a good reason. If bankruptcy was due to factors beyond your control, you’re more likely to get a mortgage. Reasons such as poor money management and excessive debt aren’t looked at favorably.

• Save a down payment. Most lenders will consider a 10% down payment (your own funds, not borrowed or a gift), or even 5% in some instances. However, the higher your down payment, the lower your interest rate will be.

• Re-establish good credit. Get a copy of your credit report from Equifax, Experian or Trans-Union, and work on building a recent record of on-time payments on major bank or credit cards. Missing a payment at this stage could lead lenders to decline you. By rebuilding your creditworthiness, you can raise your credit score, which will lower the rate you’ll end up paying.

• Work to keep your rate low. Most lenders charge a higher rate for previous bankruptcies, and some charge extra fees. You can keep your rate as low as possible by waiting for two years after discharge, re-establishing good credit, raising your credit score, saving your own down payment, maintaining good debt servicing ratios, and demonstrating a long term history of job stability.

• Don’t do it alone. As your mortgage professional, I can coach you on how to improve your credit score over time and help you source an affordable mortgage despite bruised credit. If you—or someone you know—would like a free, no obligation consultation, call me today!

Dealing with Mortgage Arrears

One misconception that has proven detrimental to a great many borrowers is the notion that a bankruptcy will help you to get out of your debt and allow you to keep your home. This is not the case.

If you are having problems with mortgage arrears, you know that there is no other debt that will cause so much headache, anxiety, and panic. After all, you can live without cable television, you can deal without having you nice new Toyota and just go back to driving your old Chevy, you can even live without the credit cards and the morning latte or the spa visits, but you cannot live without having a roof over your head. While it is ideal to head off mortgage arrears before they happen, once you are facing them you will need to deal with them quickly and decisively.

Since the lending industry has been exploding, there are a wide variety of different kinds of lenders who are currently holding mortgages. Arrears are treated differently by each lender. The reputable ones will gladly work with the individual borrower to see what can be done to help him or her get the mortgage arrears caught up and current, while some of the not so reputable ones will simply want to bide their time until they can sell off the paper to a foreclosing agent. Find out which category your lender falls into by giving them a call to see what they can do for you.

If your lender is willing to work with you, you may be able to go ahead and make interest only payments for a couple of months until you get back on your feet. Conversely, you may be able to extend your mortgage loan by the number of payments that you are behind. If your lender is not willing to work with you, then you will need to seek ways to supplement your income to help bring the mortgage arrears current. While in the short run this might mean not paying other bills so as to pay your mortgage first, in the long run you may need to look at finding another job or even a second job. However, most lenders are very willing to work with the borrower. Many banks have special departments to deal with this topic alone. After all, if they work to help you, they will get paid more in the long run.

One misconception that has proven detrimental to a great many borrowers is the notion that a bankruptcy will help you to get out of your debt and allow you to keep your home. This is not the case. While you may be able to not have the home foreclosed on if you are current, you may have to give the bankruptcy trustee your home’s equity. Similarly, if you are behind in your loan or if you have liens against your property by those whom you have not paid, you will most likely have to face a foreclosure sale. Thus, a bankruptcy for the sake of bringing mortgage arrears current is not a good option.

Whenever possible, you will need to deal with mortgage arrears quickly to prevent them from building up. Stay in contact with your lender and be open to solutions even if they do not appear attractive at the time.