Even after filing for bankruptcy, obtaining a mortgage on a home in Modesto may be easier than you think. Bankruptcy not only discharges your debt (or creates a reasonable payment plan to eliminate debt in a few years), it also signals to creditors that you've taken a big step in an effort to resolve credit blemishes and make a fresh start. And, under Federal law, you can't file for Chapter 7 bankruptcy again for another eight years, so you're actually less of a risk than other people who haven't yet filed for bankruptcy.
How Quickly Can I Get a Mortgage After I File?
Some people can get approved for traditional mortgages (albeit with high interest rates) as soon as the day after they file for bankruptcy. If you don't qualify for a traditional loan, you may qualify for an income-based FHA (Federal Housing Administration) loan through the government. If you don't qualify for either, you might need to work on your credit for six months to two years before obtaining a mortgage.
One way to ensure an immediate mortgage approval, though, is with a large down payment of 15% to 20% of the home's purchase price. This shows enough good faith that most lenders will jump at the chance to loan you the rest of the money, regardless of recent bankruptcy. Your interest rate will be higher than someone with stellar credit, but you can get approved.
For those who don't have access to this amount of cash, the biggest determining factor of your eligibility will be your credit score. Filing for bankruptcy will no doubt have an effect on your score, but there are ways to boost it back up quickly. Installment loans (auto loans, student loans and mortgages) are instant credit helpers, although you can expect higher interest rates across the board. Revolving credit options like secured or unsecured credit cards or home equity lines of credit can be more accessible tools for rebuilding your credit score as well.
In Part Two, we'll take a look at specific actions you can take to repair your credit quickly to secure a home mortgage. If you have questions about your particular situation and want to get individual advice, contact a bankruptcy lawyer in Modesto to help you devise a strategic financial plan.
