Can I actually buy a house after declaring bankruptcy? Can it be done?
The first question to be asked is, do you really want to buy a home or are you just wishing to buy one? If you really want to purchase a home after bankruptcy, i can assure you that i have many clients who have purchased homes and condos after filing bankruptcy here in Connecticut.
Now this is one of the most asked questions from clients, namely, “Will I be able to buy a house after Bankruptcy?” Well, you most certainly can and also easier and sooner than you than you thought.
You can get approved for a mortgage in around 2 years from the date of your discharge of your Bankruptcy. Your local mortgage consultant might argue that he could get you approved in less than a year, which will be a bad deal for you since the lender will be charging you a very high interest rate compared to others. Also, you will have to stabilize your financial life after going through bankruptcy before getting into debt again. Therefore, it is only prudent to get a mortgage at least after 2 years from the discharge of your Bankruptcy. The lender will be interested in offering you a mortgage since he knows that you have very less debt to pay for and also that you cannot file for Bankruptcy for quite a while.
The most important factors considered by the lenders for offering you a good mortgage are your FICO score, your average income level and the down-payment you are willing to offer. Your FICO scores can take a ‘hit’ because of your overdue and late payments and not because of bankruptcy. You can have an attractive FICO score in 12-24 months from bankruptcy by paying your bills regularly without any late payments, budgeting and auditing your credit reports for erroneous, outdated and inaccurate information.
Lenders often look for a steady income level and you are more likely to get a good offer if you have been sticking with a single employer for a while, getting a steady income. Expect a mortgage that requires you to pay not more than 30% of your income towards the house payment. The higher the down-payment, the better for the lending bank. The more money you can put down on the purchase of a home, the less you have to borrow and the lower will be your monthly payment. That is another reason for you to start saving immediately after your bankruptcy and not rush into a mortgage.
While bankruptcy is often associated with ‘surrendering homes’ especially if they are ‘under water’, it actually provides for getting a new house by wiping away all your debts and enabling you start saving to buy a new house.