Help Me! I'm bankrupt!

By
Mortgage and Lending with Benchmark Mortgage of Louisiana

 I had to file bankruptcy - what do I do now?

rightA bankruptcy filing delivers a devastating blow to your credit and FICO score, but it doesn't mean you have to wait 10 years before you can qualify for a mortgage. Many consumers who have filed for bankruptcy have been able to obtain a mortgage, although it is often at a higher rate than someone qualifying for a prime or "A-paper" loan.

While credit card companies may care about what happened before you filed for bankruptcy, many mortgage lenders are more interested in your recovery - what you've done since your filing. It won't happen over night, but here are some tips and things to keep in mind when you inquire about a mortgage with a tarnished credit past:

Give explanations. No mortgage lender is going to ignore the fact that you've filed bankruptcy and he or she will likely want to know the cause of the filing. Your lender will be particularly interested in whether the same situation could happen again. Your chances of being qualified are much better if your bankruptcy was caused by a single event such as a loss of employment or a death in the family, than if it was the result of "just spending too much."

If the bankruptcy resulted from a single event, it is important to show your lender paperwork describing the incident, such as the layoff notice or death certificate. You may also want to bring in court documents to indicate when the bankruptcy was filed.

Demonstrate good money habits now. Many people who file bankruptcy swear off credit altogether, however, it is important to re-establish your credit rating. Get a secured credit card or take on some sort of loan - furniture, a car or a major appliance - to demonstrate that you are able to make timely payments. Make sure you are making other payments (utility bills, cell phone, etc.) on time as well. You won't turn things around in a year but your credit score will improve ovlefter time.

Dispute any credit report errors. There's no need to add to your troubled credit history with errors on your credit report. Get a copy of your credit report from each of the three major credit reporting agencies: Equifax, http://www.equifax.com; Experian, http://www.experian.com; and TransUnion, http://www.tuc.com. If you encounter any errors, inform the CRA in writing what information you believe to be inaccurate and request deletion or correction.  You can also get a free credit report at http://www.annualcreditreport.com/.

Save your money. Lenders may be more willing to loan you money if you've saved up a considerable amount of money for a down payment.

Live within your means. Even subprime lenders (the few that are left) won't risk loaning you money for an opulent oceanfront mansion. Think small when the time comes to look for a home. Smaller homes often mean smaller mortgages.

In summary, don't be discouraged if you have filed bankruptcy in the past, or are currently in bankruptcy.  There are still loan programs available to you, and FHA will even allow you to remain in a Chapter 13 bankruptcy while purchasing a home!  Most lenders these days are requiring borrowers to be 2 years out of bankruptcy before they can qualify for a home loan, but there are exceptions to the rule. 

Don't wait to start re-building your credit, start today!

Benchmark Mortgage - Louisiana Mortgage Loans

 

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Rainer
39,748
Shane Sarae
Honolulu, HI
Thank you very much for sharing, this is good information to pass on to people in this situation.
Aug 09, 2007 05:42 AM #1
Rainer
165,243
Leon Austin
Mobile Notary Services - Colorado Springs, CO
Colorado Springs Mobile Notary

"Live within your means."

This, along with the rest of your post, is the most sound advice that you can give anyone -- in bankruptcy or not.  Good post.

 

Aug 09, 2007 05:58 AM #2
Rainer
11,647
Gareth Bourriague
Benchmark Mortgage of Louisiana - Baton Rouge, LA
Benchmark Mortgage

Shane ~ No problem - thanks!

Leon ~ I agree - thanks!

Aug 09, 2007 06:05 AM #3
Rainer
18,434
Rita Bradley
Laguna Hills, CA
Valuation Consultant in Orange County California 949-916-3263
Great advice, thanks Gareth!  Some of the folks who got into trouble recently with loans they couldn't handle were living beyond their means.  Fortunately, we live in the land of opportunity and if people are willing to change their habits, they can often turn things around.
Aug 13, 2007 04:30 PM #4
Rainer
11,647
Gareth Bourriague
Benchmark Mortgage of Louisiana - Baton Rouge, LA
Benchmark Mortgage
Rita ~ You're exactly right!
Aug 14, 2007 06:12 AM #5
Anonymous
hi
Well don't be in hurry to contact the answers given to you, some of them are not genuine. I have dealt with m,most of them but they end up not doing what they say they can do. But to advice you i once had bad credit and needed a huge loan i was reffed by my brother in the u k to Mr smith and he helped me and gave me some financial advice on how to manage my bad credit.
you can contact him with cartasmith0000@gmail.com
Aug 15, 2007 10:47 PM #6
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Rainer
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Gareth Bourriague

Benchmark Mortgage
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