When it comes to getting qualified for a home loan, a bankruptcy can play a crucial role in your ability to get approved. There are several factors that a bankruptcy has on the mortgage loan process. Knowing what to expect can help you increase your chances for a home loan approval.
The Waiting Period
If a person has filed bankruptcy, it will be difficult to get approved for a loan. Many home loan programs will require a waiting period from the time the bankruptcy has been discharged before the mortgage loan can be approved. Depending on what type of bankruptcy that you filed will depend on how long the waiting period will be. If you filed a chapter 7 bankruptcy, then you will have to wait at least two years from the discharge date before the loan can be approved. The two year waiting period is based on a FHA home loan. A conventional home loan will require a four year waiting period.
If you have filed a chapter 13 bankruptcy, the waiting period is still the same on a conventional home loan, but on a FHA loan, there is a way to buy a home while still in chapter 13 bankruptcy. FHA loan programs will consider the filing date when calculating the waiting period. A chapter 13 bankruptcy customer can get approved for a loan after one year from filing the bankruptcy. Since many clients are still in chapter 13 bankruptcy after one year, you must get approval from the trustee of your case, that you can add an additional debt like a mortgage. Without the trustee approval, you will not get approved for the loan.
All mortgage approvals with clients still in chapter 13 bankruptcy require manual underwriting and must follow the FHA mortgage guidelines.
Reestablishing Credit
For many customers that file bankruptcy, the hardest step in getting a mortgage approved is that many lenders require that the customer has reestablished a positive credit history since the bankruptcy. The reestablish credit history must also show no new negative accounts since the bankruptcy. For example, if you have a bankruptcy that was discharged in 2008 and in 2009, your car was repossessed, then you will not get approved for a loan.
Reestablishing new credit history usually consists of at least an auto loan and a revolving credit account. Make sure to keep your revolving account balance below 10% of the actual credit limit. Home loans require the reestablishment of credit for approval.
There are other loan programs besides FHA mortgage loans and conventional loans that have different guidelines when considering a bankruptcy. These types of home loans are considered non-traditional loans and many of these programs require a larger down payment. Mortgage loan rates on these programs are also usually 2 to 3 percent higher than a normal conventional home loan.
Avoid New Negative Credit
The most important thing to remember after a bankruptcy is to reestablish credit and do not have any new derogatory accounts since the bankruptcy was filed. You want to show the mortgage company that the bankruptcy was an once in a lifetime event and will not happen again. If the lender believes that there is a habit of bad credit or the likelihood of filing bankruptcy again, the loan will be declined.
Bankruptcy is not a mortgage killer, but if you have filed bankruptcy in the last seven years, it is crucial to make sure that you are doing everything possible to have good credit, especially if you want to purchase and finance a new property.
David White is a Senior Mortgage Loan Officer who helps his customers with their Home Loans. David specializes in FHA Home Loans which helps customers who have filed bankruptcy in the past. David has over 12 years experience in the finance industry.
For people who are huge into debt, foreclosure is a terribly real danger. Because homeowners are unable to pay back their mortgages, the banks can take away their home as collateral. Bankruptcy might seem like the best way to avoid a foreclosure, but does chapter 13 stop foreclosure?
The short answer is: yes, it can. Chapter 13 bankruptcy gives a way for people in debt to settle their debts, and maintain their homes. Continue reading this short article and I will demonstrate how you are able to prevent foreclosure and protect your home.
Chapter 13 is known as a “wage earner’s plan.” That is because it permits people to pay back what they owe. This is accomplished by a repayment plan. Debts could be reduced so they can return on their feet. Once they do, they will be still obligated to pay off their debts. If you are facing foreclosure, chapter 13 stops foreclosure. Compared with the other chapters, 13 specifically gives protection to people in debt.
To be eligible for Chapter 13, the 1st step is to submit a petition. Generally, as soon as you’ve filed a petition, you get an automatic stay. This is protection against foreclosure, and will permit you to retain your home while your petition is being evaluated. Once this is in place, it permits the person filing for bankruptcy to have some room to work with.
In just two weeks of filing for Chapter 13 bankruptcy, a plan has to be made. This plan will indicate how the individual would be able to pay off debts, and what must be accomplished to make this feasible. If the person’s income is lower that what the debts are, the debts could be reduced. The general purpose of chapter 13 is to stop foreclosure, and enable the person to repay debts. If you are in debt and worry about losing your home, chapter 13 is a great way to acquire some temporary relief from the predicament.
Filing for Chapter 13 bankruptcy can be a nerve-racking and difficult procedure however. I strongly advise that you take advantage of bankruptcy services, because they carry out all the paperwork on your behalf. A lot of bankruptcy services offer free consultations, so you can determine if bankruptcy is right for you personally.
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When you are about to lose your home, you don’t care about anything else. It consumes your every thought. The only way you will be able to relax is to get the foreclosure called off so you can go back to enjoying your home and your life. Well, as a last ditch effort there is a method available to stop foreclosure on your home.
As soon as you file, the foreclosure must be stayed and the bank cannot pursue any further collection action until the bankruptcy is dealt with. This allows you to come up with a plan to save your home by offering a modified schedule for paying your debts. The plan does not have to cover all of your unsecured debts, but it does have to get the approval of a bankruptcy judge before it can go into effect.
You can’t file for bankruptcy until after you have completed credit counseling. This requirement serves the purpose of making sure that bankruptcy is really the only way you will be able to pay off your debts. The credit counseling company will work with you try to come up with a way for you to repay your debts without bankruptcy. Their proposed plan must be submitted when you file.
You are given fourteen days from the time you file for chapter thirteen bankruptcy until your proposed repayment plan has to be on file with the court. This window can enable you to go ahead and file if you need to get the foreclosure on your home stopped before you can finish your plan.
You will be required to attend a creditor’s meeting, and all of the companies and people you owe money will have a chance to ask you questions. The purpose of this meeting is to give your creditors a chance to object if they do not feel you will be paying as much as you possibly could under the proposed plan.
After the creditor’s meeting has been completed, your repayment plan will be reviewed by the court to make sure that it meets the requirements set forth in the bankruptcy code. It can take up to 45 days for approval, but you have to start making payments according to the terms of the agreement within 30 days.
The downside to using bankruptcy to avoid foreclosure is that sometimes it only postpones it, and then you end up with both a foreclosure and a bankruptcy on your credit. It is often difficult to stick to the repayment plan, and if you fail, you can still lose your home. But before you file chapter thirteen bankruptcy explore all possible options, talk to an experienced loan modification attorney first.
Call Janian and Associates for a free consultation with a Loan Modification Attorney.
Have circumstances in your daily life give you no option but to file bankruptcy? These kind of rough economic circumstances have pushed most people to do exactly the same; if you listed your home in the bankruptcy or even if you need to move to obtain a new job or get closer to family, or for whatever reason, you most likely are wanting to know about getting a mortgage loan just after bankruptcy. This is how to accomplish it:
Firstly, allow some time to pass before attempting to get a new mortgage. Around 2 years is the commonly accepted duration of time for the majority of lenders to start considering you for a mortgage again. Those 2 years give you and your prospective loan providers time to take stock of your situation and indicate that you have had sufficient opportunity to recover and begin your own personal debt recovery.
Secondly, make sure to pay any bills when they’re due. While in this rough time, it usually is difficult to ensure timely bill payment, even with the help you received from your bankruptcy. Nevertheless, it’s very crucial.
Furthermore, you’ll need to make sure that anyone who’s receiving payments from you is accurately reporting your good standing to the credit bureaus. Get your annual free credit report, or perhaps even fork out a few bucks to acquire one more frequently than that. Should you be paying your bills by the due date, but no one can see that, it can be just a good thing gone to waste.
Lastly, begin obtaining the money to offer a down payment. When my credit score was good, I didn’t need much of a down payment at all; currently, however, after my bankruptcy discharge, in the event I would like to buy a house again, I’ll require a significant amount of cash to put down. You may, too.
So begin saving as much as you can out of each and every pay. Soon, you’ll be able to secure a home mortgage and purchase a home of your own.
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