Stuck in getting a mortgage after bankruptcy? Well, the process is pretty difficult. But you can secure it with the right approach. You have to understand the effect of bankruptcy on mortgages to follow the right steps for financial stability. Also, you have to rebuild your credit score to get fair loan terms. Only a professional attorney can offer full assistance in this. In this blog, you will learn everything about bankruptcy and mortgages. This saves you from any future surprises.
Bankruptcy Types and Their Impact on Mortgages
Chapter 7 Bankruptcy: The Fresh Start Approach
This is the most common type of non-business bankruptcy. It happens when you do not have enough resources to pay your debts. Your only resort is to go for Chapter 7 bankruptcy. This option gives you a clean slate to rebuild your finances easily.
You have to sell all your non-exempt assets in this. Also, it stays on your credit report for 10 years. So, you will face issues in securing different loans. Have a look at the waiting periods of loans:
- Conventional: 4 years
- FHA & VA: 2 years
- USDA: 3 years
- Non-QM: Nil
Chapter 13 Bankruptcy: The Debt Reorganization Plan
It is another popular type of bankruptcy. People have to follow a repayment plan to pay their debt. It is an ideal option when you have a consistent source of income. You can enter into a 3 to 5-year repayment plan easily with this. This also helps you protect your assets. Here is the waiting period for different types of loans:
- Conventional: 2 years from discharge date/ 4 years from dismissal date
- FHA & VA: 1 year
- USDA: 1 year
- Non-QM: Nil
How Long After Bankruptcy Can I Get a Mortgage?
Legal Considerations for Post-Bankruptcy Mortgages
You have to complete different requirements to get a mortgage in no time. Government-backed loans have shorter waiting periods than traditional ones. In case of Chapter 13, you must get a court approval. So, it is wise to get a mortgage attorney who can help you fulfill all the considerations.
Financial Recovery Strategies After Bankruptcy
Aiming for financial stability is key to get a mortgage after bankruptcy. Here are some strategies:
- Improve credit score
- Save for down payments
- Reduce debt-to-income ratio
- Create responsible and safe credit habits
The Role of Mortgage Attorneys in Post-Bankruptcy Home Loans
When to Consult a Mortgage Attorney
You can consult an attorney if you are facing such as:
- Tackle getting approval for a mortgage after bankruptcy
- Stuck in legal disputes with the lenders for the loan terms.
- Eager to get court approval in case of Chapter 13 bankruptcy.
How Attorneys Can Help with Mortgage Problems
You must consult an attorney for mortgage problems as he/she can assist you in several ways. Your legal team can negotiate with the lenders to aim for fair loan terms. Also, you can get guidance on alternative finance options and mortgage modification programs.
Steps to Secure a Mortgage After Bankruptcy
Rebuilding Credit Post-Bankruptcy
Applying for a mortgage becomes easier when you have a strong credit score. So, you must follow the below steps to rebuild your score.
- You have to make all payments on time, such as rent, credit accounts, etc.
- Keep your credit to the lowest limit.
- Monitor the credit reports to keep track of the progress and avoid any errors.
Preparing for the Mortgage Application Process
Given below are a few things that you have to do before applying for a mortgage.
- Review all the requirements of the lender
- Save some money for the larger down payment
- You must get the pre-approval
- Gather all the required financial documents for the process
