How to Get a Mortgage After Bankruptcy
The ins and outs of securing mortgage loans after bankruptcy
While many people probably assume there is no way to secure a mortgage after bankruptcy for at least seven years - the normal period during which the slate is wiped clean from the perspective of creditors - that's not necessarily true. Depending on your situation, you may still qualify for a mortgage just a year or two after declaring bankruptcy.
That's not to say it will be an easy approval process or that you'll have the same set of circumstances you would have had prior to filing. For instance, to secure a mortgage after bankruptcy, you will most likely have to:
- Immediately begin cleaning up your credit record, and show a consistent record of paying bills on time
- Put up a larger down payment than you ordinarily would
- Pay a higher interest rate, perhaps only slightly higher, than might otherwise be the case
Repairing your credit after bankruptcy for mortgage approval
How can you begin repairing your credit record to open up the possibility for a mortgage after bankruptcy? Start with these tips:
- Pay bills before their due dates.
- Ask creditors or collectors to report that you have paid your debt in full. If they agree, get it in writing.
Paying bills before their due dates
About 35% of your credit score is determined by whether or not you submit payment for your bills on time. Whether you foresee applying for a mortgage after bankruptcy or not, it is always good practice to begin repairing your credit score by paying your bills on time. You can take this practice one step further by contacting your billers and finding out which day each month they schedule reporting to the credit bureaus. You will improve your score faster by submitting bill payment before the reporting date rather than waiting for the due date written on your statement.
Asking creditors to report that you have paid your debt in full
Companies will often look more closely at your recent payment habits than they will at past habits when making lending decisions. So, while preparing for an after-bankruptcy mortgage, it is important to begin paying off debts and getting those payoffs reported to the credit bureaus. Every time you pay an account in full, call your creditor and ask them to report the payoff to the credit bureaus.
Mortgage loans after bankruptcy: Specific Chapter 13 conditions
If you have filed for bankruptcy under Chapter 13 of the bankruptcy code, which helps debtors erase obligations from second mortgages, you may have different conditions than detailed here. When you file Chapter 13, the trustee who is overseeing your bankruptcy case is unlikely to approve the release of funds for a new home purchase. Typically, the longer you wait after filing for Chapter 13, the better your chances are for getting approved to move forward with a mortgage after bankruptcy.
Apply for a mortgage with Citizens Bank
If you are looking for a mortgage or would like to talk to one of our home loan advisors about qualifying for a mortgage after bankruptcy, call us today at 1-888-514-2300.