In the past, traditional mortgage lenders automatically rejected people who had declared bankruptcy. Many potential home-buyers felt they must wait at least seven to 10 years after a bankruptcy to be eligible to become homeowners. However, this is no longer the case. There is a common misconception for many who believe their chance of home ownership is a long way away after they have filed bankruptcy. Many believe that filing bankruptcy means that they never be able to own a home again. This is simply just not true.
Why Do Individuals Go Bankrupt?
In order to understand why that is, it is important to know why people go bankrupt. While some people declaring bankruptcy have had trouble managing their money, a large number of those declaring have simply experienced unfortunate events. Bankruptcy debtors in New York and New Jersey are filing bankruptcy at high levels over the last five years
Doesn’t Bankruptcy Ruin Credit Forever?
Though a bankruptcy is certainly a blemish on a credit report, it does not necessarily disqualify a borrower from being able to own a home or get a mortgage. Recognising that sometimes bad things happen to good people, some select loan officers are becoming more willing to take a calculated risk. What borrowers tend to forget is that they have different options to be able to get a mortgage again. First, they can offer the bank more of a security so that the bank will give them a mortgage after filing bankruptcy.
Instead of waiting two or four years after being discharged from bankruptcy, some mortgage professionals are willing to give a home loan much sooner. Life after bankruptcy does not mean you can’t own a home or have credit again. I personally have seen lenders that give people who have filed bankruptcy a mortgage after two years. Obviously each situation is different but this simply shows that you can get another mortgage. Those who have declared bankruptcy liquidation may be eligible for a loan one year after discharge, and those who are in a Chapter 13 debt agreement could also be able to get a mortgage.
Interest Rates After Bankruptcy
Another common misconception is that a previous bankruptcy on your credit report will require you to have a large down payment and pay extremely high interest rates. Again this depends on the mortgage lender.
Some lenders are even prequalifying buyers for a loan, saving time and making the home-buying experience easier and more efficient. When a buyer prequalifies they will have the advantage of greater negotiating power.
Speaking With a Mortgage Professional After Bankruptcy
No matter what the situation, speaking with a select mortgage professional is ideal. They have programs in place that will work for the buyer with a bankruptcy history. If a buyer cannot get approved, there are customized plans that can re-establish credit to help the buyer become mortgage-ready, ensuring home-ownership in the future. Many Staten Island residents who have filed for bankruptcy have gotten homes after.
Because of new options, bankruptcy no longer needs to stand in the way of getting a home loan. With the help of more creative lenders, those who have experienced financial difficulty will have an easier time getting a mortgage.
Karra L. Kingston Esq. is a law firm that services New York and New Jersey. Please give us a call today so that one of our experienced attorneys can review your situation and help you determine whether bankruptcy is the right option for you. Contact us at 973-979-9078 or fill out a form online.