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Follow on Google News | Jason Bonarrigo Explains Getting a Mortgage Following BankruptcyBy: Expose Yourself PR What is bankruptcy? Bankruptcy is a legal process handled through the court system for people who find themselves in a position of being unable to pay their debts. There are two types of bankruptcy, Chapter 7 bankruptcy (also known as “straight” How does bankruptcy affect my chances of being approved for a mortgage loan? Following Chapter 7 bankruptcy, the rule of thumb is that most lenders will expect you to prove your financial responsibility for two years prior to lending you money for a home. In cases of Chapter 13 bankruptcy, this waiting period can be more like one year, with some exceptions for veterans, who might be considered for a loan more quickly. It’s important to note that the one- to two-year waiting period doesn’t start at the point that a bankruptcy is declared. Rather, you must wait that amount of time following the final discharge of bankruptcy. What about my credit rating? Your credit will undoubtedly take a hit when you declare bankruptcy. Chapter 7 bankruptcy remains on your credit report for ten years, while Chapter 13 bankruptcy stays on your report for seven years. Many people who declare bankruptcy had difficulty making payments on their debts before going through the bankruptcy process, and any late or missed payments prior to the bankruptcy will also be reflected on your report as a blemish to your credit. The best thing you can do following bankruptcy is to work diligently to rebuild your credit. Start small, with small loans or lines of credit that you pay on time each month. It will take time, patience, and careful attention to every financial detail, but over the years, it is possible to recover from bankruptcy – and the good news is that you’ll be doing it with a clean financial slate. What about interest rates? Interest rates on everything from auto loans to home loans are bound to be higher if you have a bankruptcy listed on your credit report. You should also prepare yourself for the possibility that a creditor will require a hefty down payment to prove you’re a worthy financial risk for them to take on. However, higher interest rates could be a small price to pay for having staggering debt reduced to little or nothing. If you have a bankruptcy in your financial history, talk to your lender or loan officer about your options for a mortgage loan. He or she can guide you through your choices and help you determine what type of loan could work for you. End
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