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.
Steps 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 needs to be done primarily, because after you apply for a mortgage or check out for home loans after filing for bankruptcy, the lenders are bound to check the credit report.
- After examining your report minutely, highlight the negative remarks on the same.
- Once you are done, 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 defrayal, 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.
- It is of prime importance 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.
- It is only after this step is executed that you may begin searching for a house.
- Besides, there are some other points that you need to remember before you take the plunge. They are enlisted in the paragraphs below.
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 within 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 beyond a limit.
- You need to think about the consequences if your income suddenly drops. After all, 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 sub-prime home loans.
- This encompasses 6 months worth of house payments 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. You can either make the payments or forget about the house.
- Make sure you save as much as you can and pay off your debts as much as possible, post bankruptcy. In fact, do not let the situation arise in the first place.
I hope 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!