Should you ever face the unfortunate experience of filing bankruptcy chances are that you will see someone else who is filing bankruptcy for the 2nd time or maybe even the 3rd time. This simple means that although bankruptcy hampers your credit ratings substantially, it’s not impossible to get credit, you just have to know how. More importantly, you should try not to get into the same situation again.
You must remember is that although a bankruptcy can legally remain on your credit report for up to ten years your credit can start improving immediately after your case is closed. You must understand that while after bankruptcy you may be tempted to never use your credit card again in order to build up a credit score. It is better that you do – to the extent that you start using it immediately if you can muster the will power to use it wisely and pay your bills on time.
This also applies to buying a house after filing for bankruptcy. Studies indicate that after two years of your case closing and if you have managed your credit prudently, you will get the house loan in the same manner as if you had never filed for bankruptcy in the first place.
One of the most important things that lenders look for is the down payment that you can make, the stability of your income and the ratio between your monthly income and the loan payments. Take this example to understand this; Say that in the case of your bankruptcy that it closed some two years ago and you have an annual salary of $50,000 with spare cash for a down payment to the tune of $50,000 and the house loan that you want to take will need you to pay installments of $1,000 every month. Chances are that given your present state you will find it easy to get the loan and your past history will not affect your present circumstances. Lenders will normally approve a monthly mortgage up to 28% of your pre tax income. Lenders are normally more interested in your ability to buy a house than what happened in your past. Important to remember is that you should be up front about your bankruptcy. Talk about it and also state what a great job you have done of rebuilding your credit rating in a short time.
You will need to get FHA or a VA loan guarantee to get a loan for your house, the benefit is that the FHA is quite forgiving in giving loans to people who have filed bankruptcies.
FHA will insure mortgages to individuals who have filed for Chapter 7 bankruptcy two years after the discharge, the condition here is that the individual should have established a good credit rating or must have chosen not to incur any new credit expenses. VA regulations are also similar and they state that if the discharge was incurred two years ago it may be disregarded. In the case of Chapter 13 bankruptcy the VA will guarantee the loan for the house when the plan payments are finished, or even after 12 months of payments where the Trustee or Bankruptcy Judge approves of the new credit.
Increasingly more and more agencies are willing to provide credit even after bankruptcies and the period that you must wait is also getting less and less. If you have filed Chapter 7 or Chapter 13 and are on track with your repayment plans and have improved on your credit rating based on sound debt management, chances are good that your Trustee or judge will approve the loan and you will find a lender who will finance your debt. What you should also keep in mind is the loan amount that you are willing to take again. Because while today it may seem that getting a loan is your primary problem with the dozens of lenders waiting in today’s competitive market you might end up borrowing more than you can afford and fall in the debt trap again.
Key things to remember are that bankruptcy is not the end of it, but at the same time it’s something that may haunt you again if not handled carefully. Learn from it.