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Being able to buy a home following bankruptcy

On Behalf of | Aug 13, 2021 | Uncategorized

People who have filed for bankruptcy in North Carolina are trying to improve their financial circumstances. Whether the overwhelming debt is due to medical expenses, a job loss, or for other reasons, there will be a sense of relief when the process is completed. However, the ability to buy a home is often a concern.

Factors in buying a house post-bankruptcy

There are several factors that weigh heavily in the ability to purchase a home. If it is a Chapter 7 liquidation bankruptcy, it generally takes up to four years after the debts were discharged or the case was dismissed to qualify for a loan. In a Chapter 13 reorganization in which payments are made to a trustee for three or five years, the credit score is not damaged as much as it is in Chapter 7. If Chapter 13 results in a discharge, it takes at least four years from the filing date and two years from the dismissal to apply for a conventional loan.

It is imperative to repair credit by re-establishing it with a new credit card – often secured – and making the payments on time. When applying for the mortgage, a letter of explanation as to why the bankruptcy was necessary can ease lenders’ concerns. Getting a preapproval is a way to be prepared for how much is available to spend to buy a home. It also tells the sellers and real estate professionals that there is funding to make the purchase. There will be lender inquiries into the homebuyer. This requires providing financial information and the current assets, debts, employment situation, and income. Following these steps is critical after a bankruptcy.

It is possible to get a mortgage after bankruptcy

One reason people who could benefit from bankruptcy are reluctant to file is due to fear about the future. It is possible to buy a home after rebuilding their credit. Understanding the process is essential. Having experienced advice from the start can be helpful with filing and knowing how to get into a stronger financial position after the bankruptcy case is complete.