In handling your finances, the first thing that you should always remember is to keep good credit scores while avoiding too much debt. This is the most effective way to protect your investments and your savings. If you fail to do this, you can experience bankruptcy and experience a series of terrible events. Because of it, you might fail to address mortgage and experience foreclosure. Selling your home to repay your home loan would not be enough because you will not have enough money to buy a new house. Hence, you should look for a lending company and reapply for mortgage again. You cannot do this if you do not know the necessary steps that you should do. If you want to make things easier, read this article and understand the process of qualifying for a mortgage after bankruptcy.
Identifying your bankruptcy chapter
The first thing that you should do is to research about the type of bankruptcy that you experienced. If you had a chapter 17 bankruptcy, it would not disappear from your history until ten years have already passed. Meanwhile, if you had a chapter 14 problem, it would linger for at least seven years in your tainted fiscal records.
These long years should not discourage you. Actually, you can continue to repay your debts and achieve better credit scores even if you have bankruptcy records on your report. This means that having this mark on your history does not hamper the improvement of your scores in any way. Do not let it get into your head because nothing can stop your gradual development once you are determined to address all your outstanding debts.
Understanding the required “waiting time”
Most lenders refuse to approve the loan requests of people who are not patient with their required “waiting time”. This window time is usually a two-year gap between the date of your bankruptcy and your current mortgage application. They implement this strictly in order to allow distressed borrowers to have adequate time for credit rebuilding. Those who adhere to this policy are granted with 100% financing and regular interest rates.
Meanwhile, other companies are more lenient when it comes to mortgage approvals. Even though two years has not yet passed since your bankruptcy, they would allow you to obtain a home loan from them. However, this is quite tricky because of the additional costs that it brings. You will need to pay a larger down payment if you prefer this kind of method. In addition, your lenders would also issue higher interest rates together with your mortgage. If you are not confident with this kind of deal, you should choose the former method and cope with the two years window time.
Show them you are a “safe risk”
The last step is to prove to your lenders that you would be a safe risk to their company. Secure all the documents that could testify the marked development of your finances. These include the computation of your current income-to-debt ratio, your average annual income, and other documents that show your capability of reimbursing the money you borrowed. If you have bonus slips or other papers that can prove your good performance at work, you can definitely change their initial judgment about your tainted credit records.
After doing these three things, you would easily get a mortgage approval in no time. Always remember that there is still hope for you even after a disheartening state of bankruptcy.
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