Tag Archives: debt

Buying A Home After Bankruptcy

Buying A Home After Bankruptcy

If you have ever experienced having to go through bankruptcy then you know just how devastating it can be.  One thing that you may be wondering is if you will still be able to attain a home loan.  Also, not to mention the thought of  buying a home after bankruptcy can still be a possibility.

Bankruptcy can make your home mortgage loan approval extremely difficult, but we at Greater Mortgage Solutions can still make it possible to get you approved for a new home loan.  Not to mention bad credit does not last forever and there are loans for bad credit being accepted all the time. These type of lenders are known as Subprime lenders and they are focused on helping individuals with bad credit in attaining the home of their dreams after bankruptcy. Do keep in mind that time does have to pass after bankruptcy typically at least 1-2 years after re-establishing some credit.

url

There are an increasing number of people with poor credit who are searching  for home financing. Here are some extremely good ideas to consider after bankruptcy to expedite your approval for a home loan.

Increase your credit rating. By simply making regular payments on time or on a regular basis, the odds of your credit score rising is high. Once your bankruptcy has ended for some time, usually about 2-3 years, you should have an easier time qualifying for a smaller interest rate for a mortgage loan.

Owning an asset. Renting a home may be a simple way of putting a roof over your head, but you are essentially throwing your monthly payments away each month. Financially it is better to buy a home because over time, the value of your home will increase, thus working your way towards owning an asset. After some time of purchasing your dream house you may be able to consolidate any other debt that your bankruptcy might of not included, you can achieve this by attaining an equity loan.

Things To Consider After Bankruptcy

It can be extremely tempting to purchase an new home, vehicle, or to perform renovations after bankruptcy discharge since you have no debt left. Due to the financial relief that you had, you may probably feel like you can afford a larger house payment. Let me tell you that it is not that easy so I have provided some things to consider before you obligate yourself to a new mortgage payment.

The Pre-payment Penalty.  This penalty lasts about 6 months worth of house payments, and usually lasts anywhere from 2-3 years. Upon signing those mortgage documents you need to make those payments on time, on a timely basis.  Making those payments on a timely basis is crucial to prevent you from losing the house. So we suggest to have extra funds available for incidentals that you may need in the future

The Two Year Mark. After 2-3 years from the date of the bankruptcy discharge, mortgage loans will be much easier to attain. With a small down payment, you might even be able to get a mortgage loan without a pre-payment penalty. If you are close to the 2 year mark we advice to wait it and have more mortgage loan options.

Borrowing Too Much. Don’t spend more than you can afford. This mistake tends to be the most common that we usually get into. When deciding to buy a house, purchase one that you know you can afford. Avoid maxing out your credit or living on the edge of your income.

Bookmark and Share

Do You Know The Impact Of An Installment Loan Vs. Revolving Credit On Your Credit Scores ?

There are several things that affect your credit but one of the main factors to having credit and maintaining a healthy score is understanding debt.  Buying a home is a big step and getting a home loan sometimes seems intimidating.   There have been times that I have had clients that were reluctant to apply for a home loan thinking that they would not qualify.  When in reality they did.

The two basic forms of debt are installment and revolving and having too much of one can hurt you more than the other.  An installment loan is a loan based on repaying the loan with payments over a certain amount of time.  An example of this is a car loan, 3 or 5 years and fixed payments during that time. Your payments include both principal, which is the amount of money you borrowed, and the interest, which is the additional amount you pay for the privilege of borrowing the money.  This is the form of debt that is more predictable for the lender in regards to knowing exactly what the borrower owes and what the payments are going to be.   In fact if you have less than 6 months left on your loan most lenders won’t even count that debt against you.

A revolving line of credit, for example a credit card, may have a minimum payment based on the lender’s policies that may not even cover the interest you owe.  I have seen some cards where the minimum payment did not even cover the expenses for the interest so the balance owed was actually growing.  The outstanding principal which unlike the installment loan can literally last forever when you only make the minimum payments which never really pays down the principal, on the money you owe.  Keep in mind that if all you do is make the minimum payments that it will register with the credit bureaus as well and keep you from getting a higher score.   The better your credit score the better the loan terms can be for you when getting a home loan.  this does not mean you are guaranteed a home loan just means that you have better chances of qualifying with good scores.  Lenders feel more confident that you will be able to pay them back.

It is not exactly true that you need to have good credit to buy a home, you don’t need perfect credit either just relatively decent credit.  There are other programs available for people who have less than perfect credit. You must understand however that these programs consist of higher interest rates.  Reality is you cannot expect to get the same interest rate on a home loan as someone that may have perfect credit if you have issues with your credit.

Another thing with revolving credit is that if you have too many cards even if they have no balances.  The reasoning behind why it can affect your credit is because at any moment you can choose to run those cards up when ever you want.   Which puts you at a higher risk for lending money.   Keep a few cards for emergencies and those incidentals that pop up here and there.  Stay away from the department store credit cards to save that 10% off your purchase price it will cost you a lot more in interest when all is said and done.  Reality is, you can use a Visa at all those stores try to limit your credit cards  to 4.  Any more than that you really have to ask yourself why do I need all those cards?

If you have any questions on buying a home or getting a home loan just ask.

 

 

Bookmark and Share