Can You Have Mortgage Loans After Bankruptcy?

After bankruptcy proceedings, most people worry if there is hope to secure another credit. With traditional lenders, it is common that they will advise you to wait for two years. However, even a year may be too long to wait before securing mortgage loans after bankruptcy. You should be persistent if you are not at fault. If you want to get on your feet immediately, brace yourself for a high down payment and higher interest rate. Also, you will have to comply with other requirements that are imposed on clients like having suitable credit standing.

The Penalties

Under Chapter 7 of the United States Bankruptcy Code, the borrower who filed for bankruptcy will have to wait ten years before his or her credit record is cleared. If the Chapter 13 of the same Code is used, the credit record will bear the same mark for seven years. It would be very difficult for any individual to secure a new loan after the legal proceedings. However, for a person with patience and persistence, all hope is not yet lost as long as he or she has the resources to start anew.

Do Not Wait for Too Long

However, the waiting period may be reduced by citing the cause of bankruptcy. If it is something beyond the borrower’s control, it is logical you should provide it when you faced with, for example, a death in the income earner of the family, a divorce or a sudden illness. These are some of the reasons that need to be given weight. Even when the bankruptcy process is still in the final stages, the borrower is encouraged to write a hardship letter to the lenders for information on their mortgage loan application.

It must be noted that in 2011 there were around 1.362 million personal bankruptcy cases filed. Out of this figure, around 70% were put in Chapter 7 of the US Bankruptcy Code. This represents a big part of the market for mortgage loans after bankruptcy.

The Options

If you have just recently filed for bankruptcy and received the court decision, you have only three options to choose from. These are the following.

Wait for two years and rebuild your damaged credit standing.

Attempt to negotiate a mortgage loan with traditional lenders with a detailed application. The listing is as follows.

  • You have to submit a copy of your two years’ income tax returns.
  • You have to produce your recent paycheck stubs from your employer.
  • You have to secure a certificate of discharge from your bankruptcy proceedings.
  • You have to produce copies of your current bank statements.
  • A listing of all your liquid assets is also required.
  • You have to submit a written statement or explanation about your bankruptcy.
  • Prepare for a big down payment and accept a high interest on the loan.

File a loan application with no doc or low doc mortgage lenders. However remember that a down payment and interest rates may be too big to comply with.

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