Sometimes no matter how hard you work and how careful you are in the financial aspect of your life you can still have issues and problems come up. The American dream can sometimes seem to be at an impossible distance in certain situations whether it was a divorce, job loss or the market tanked. Bankruptcy is not fun for anyone but there is some light at the end of the tunnel. There is a good probability that you will be able to pick up the pieces and recapture what has been lost so quickly. Buying a house after filing bankruptcy is possible and sometimes can be a viable option much sooner than you think.
The biggest change happened when a new policy was approved from the Federal Housing Administration announced (August 15th 2013) that some could get approved with an FHA backed mortgage as soon as one year after the bankruptcy. This is of course the best-case scenario but there are other possibilities to get approved for a mortgage in a timely manner. Other things to keep in mind are the different situations as some may have just a bankruptcy and others could have had short sales or other foreclosures on their plate as well.
When you are interested in getting back to the world of homeownership it is important to understand a minimal timeframe of one year is required from the date of bankruptcy discharge OR if you had a short sale it would be from that closing date, same goes for a foreclosure. Other rules for this particular situation would be that your bankruptcy and the loss of your home has to fall under what FHA calls an “economic event”. Some of these rules include loosing your income for at least six months, 20% job loss or a major pay reduction. This may nix you out of this avenue but even without this loophole a traditional turnaround time to purchase a home could be as soon as 2 years.
After going through such a big financial ordeal like bankruptcy two years may be just enough time for you to get back on your feet. At one point I have heard roomers that it can take up to seven years before you could qualify for a mortgage, but in more recent days it has taken some much less time. The key things to keep in mind are as follows
Try and rebuild your credit or just have no credit (as opposed to bad credit). This would include making your payments on time, set up automatic payments and regulate your credit report. This would be similar with no credit score except you will have to pay cash for everything and have no credit cards or credit lines of any kind.
Save up for a down payment. Believe it or not this really is being required for almost everyone, not just the people with a foreclosure on his or her record. The idea is at least 20% should be saved for a down payment but when in doubt, the more you save the better chance you have of the lender qualifying you for the house. Showing the lender that you are serious on doing right by the house note and have a good financial means to back it makes the chances much higher when being reviewed by the underwriter.
Eliminate debt and keep it away. When going about these steps don’t acquire more debt, no additional car loans or other credit lines to your favorite clothing store. None of this will look good when applying for a home loan.
Keep your income stable. If you are one that jumps around from job to job it really can look negative on your mortgage application. Ideally you will want to have a good stable income for around two years to show reliable income.
There are other items you may come across such as higher interest rates or even having to look at a less expensive home than you thought you could afford. It would be wise to find a place that could be easily paid off with a 15-year mortgage this way hopefully you wont run into this situation again. The moral of the story is that buying a home after bankruptcy is possible and in some instances sooner than you think and each situation is different, do your own research and don’t lose faith!
If you are ready to buy a home check out www.moversatlas.com to research the neighborhoods and communities that you are interested in buying real estate. We provide everything you need to know to make an informed decision on buying your new home!