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Mortgage after Bankruptcy

Individuals wanting to obtain a mortgage after bankruptcy need to get their financial affairs in orders long before applying for a loan. Obtaining credit is considerably more difficult today than it was just a year ago. The banking industry meltdown caused lenders to tighten regulations. Individuals with excellent credit find it challenging to obtain mortgage loans. Those with poor credit don't stand a chance.

In order to qualify for a mortgage after bankruptcy, borrowers must establish a history of paying their bills on time. Housing costs are usually the largest expense people have. Financial experts suggest leasing a home with a monthly payment equivalent to a mortgage payment. Paying rent on time each month helps debtor's establish a track record.

Rent payments should always be paid by check. Cancelled checks are stamped with a date and time code, which can be used as verification. Money orders and cash are not a good option because they cannot be validated. Tenants who do not have bank accounts will need to obtain receipts from their landlord to document their payment history.

Most mortgage lenders require borrower's to have a checking account. Individuals who have outstanding checks or bank fees must do whatever it takes to clear their name. Oftentimes, banks use Check Systems to qualify applicants. Anyone who has been denied a checking account; or those who would like to review their file can request a free report from Check Systems at www.ConsumerDebit.com .

Before applying for a mortgage note, debtors should obtain a copy of their credit report. This can be accomplished by contacting each of the three major credit reporting agencies which include: Equifax, Experian and Trans Union. AnnualCreditReport.com provides debtor's with a free credit report for all three credit bureaus. Anyone can obtain one report per year at no charge.

Review all charges reported at each credit bureau. If debts were discharged through bankruptcy, but not removed from the credit report, debtors will need to contact each creditor and request the information be removed.

Having erroneous information removed requires patience and persistence. The Federal Trade Commission provides step-by-step instructions and sample creditor letters via their website at FTC.gov. Creditors must respond to disputes and credit errors within 30 days. However, it can take up to nine months before information is permanently removed.

Credit can be rebuilt using secured credit cards. Also known as prepaid credit, secured cards require debtors to deposit funds into their account. Debit cards are provided and funds can be used as needed. When funds run low, debtors can make a deposit into their account.

Over time, credit limits can be increased and eventually debtors can obtain unsecured cards. Both secure and unsecure cards are reported to credit agencies.

Chapter 13 payments must be repaid in full before obtaining mortgage after bankruptcy. Repayment plans generally last for three to five years; depending on the amount of accrued debt.

The new bankruptcy laws enacted in 2005 require debtors to repay a portion of their debt. Debtors must adhere to this plan or face failing out of bankruptcy. Individuals who fail out of bankruptcy significantly reduce their chance of obtaining a mortgage loan, so every effort should be made to clear these debts in a timely fashion.

Getting back on track after bankruptcy requires financial discipline. However, with hard work and budgeting, financial setbacks can be overcome. If you are interested in learning more about budgeting and credit restoration, we invite you to browse our bankruptcy article library. Here you will find information and resources to help you overcome debt and obtain a mortgage loan.


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Published on June 03, 2009 at 02:52 AM

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