Buying a house is nothing but a daunting task. And for people who have lost everything, to rise from scratch and even think of any other expense is quixotic. But still, there are some who nurture the dream to buy a house even after bankruptcy. So if you fall in that category, scroll down to know how you can do this.
Bankruptcy is not a very pleasant thing and has a certain social stigma attached to it. Once you file for it, then it is difficult to rise and repair the financial rut you are in. It is a traumatic period for those who go through it. But there are those, who in spite of this difficult financial situation, think of something like home buying. Well, it is not impossible, but you should be patient and manage your negligible financial resources judiciously. Another thing to remember is that time is a very significant factor. This is because normally after 2 years of bankruptcy you can buy a house is. But all said and done, this issue looms large in the psyche of the people.
How to Buy A House after Bankruptcy?
The first thing you do is to request for a credit report from the three major credit bureaus. This is because, after you apply for a mortgage or check out for home loans after bankruptcy filing, the lenders are bound to check the credit report.
After examining your report minutely, highlight the negative remarks on your report. Once you are done with this, send letters to the credit bureaus requesting them to remove these items.
Never ask for more than four removals in a letter. Remember, even after bankruptcy filing, the report will mention all the debt discharged by you.
Begin saving money now, as a minimum of 10% down payment would be needed.
Save as much as possible in a high interest rate savings account. Cut down as much as possible on expenditure.
Have automatic payments on bills, for avoiding the pending defrayals, especially in case of loans of any kind.
In case you make a late payment, ensure that you pay it before it becomes late for 30 days.
Another extremely important thing is to pay off your debts as much as possible or totally, to be in a better situation. This is taken into account by money or mortgage lenders when they deem your financial condition fit for mortgage. More the debt, the more problems it will create.
Finally, ask a member of your family to sign the papers along with you.
Once you are done with these first few steps, you can start searching a house. But there are a few other things you need to think and delve about before you take the plunge. They are the following:
Two Year Mark: As mentioned earlier, once the bankruptcy is discharged, after 2 or 3 years of that date, you would be able to get mortgage loans easily. You can even get a mortgage loan sans prepayment penalty, if there is a small down payment. Thus, in case you are around the 6-month mark in that period of two years, it would be a better idea to wait and have as many mortgage loan options as you can.
Do not Go Overboard: A crucial point here is to settle for a house that you are sure of being able to afford. Avoid stretching your income, expenses and credits too much. What if your income suddenly drops? You still have to make the payments, right? So do not live right up to the edge of your income.
Penalty before Payment: A prepayment penalty accompanies a majority of subprime home loans. This encompasses 6 moths worth of house payment and lasts for a maximum of three years. After signing the mortgage documents, if you do not have the money enough to pay prepayment penalties, you are in a deep abyss. Either you make the payments or forget about the house.
Make sure that after bankruptcy, you save as much as you can and pay off your debts as much as possible. In my opinion, do not let the situation arise in the first place.
So I think you are now a bit hopeful and you have got an answer to the haggling question. You can surely buy a house even after you have filed for bankruptcy, with patience and judicious use of financial resources. All the Best!
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