Home Equity Loan Bankruptcy - your questions answered right here...
More About Home Equity Loan Bankruptcy...
Despite those happy advertisements that you can bounce right back from bankruptcy, it will take time, effort, and money for you to be able to get a home mortgage loan. But take heart, it's not impossible. After all, the true purpose of bankruptcy is to allow people to start over.
Bankruptcy stays on your record for a long time: chapter 7 for ten years and chapter 13 for seven years. Even if you wait until bankruptcy clears your credit record, most loan forms will ask if you have ever declared bankruptcy. If you lie, even though the bankruptcy is years past, you have technically committed fraud.
If you filed bankruptcy chapter 7, you are more likely to have difficulty getting a home loan than someone who files chapter 13 since it involves some, if not all repayment of debt, rather than debt discharge. Regardless of the case, your credit activity after the bankruptcy can affect your chances to get the loan.
Mortgage lenders will probably not deal with you if you have recently filed for bankruptcy. You will begin to have the best chance of mortgage approval after at least two years have passed since filing bankruptcy. During those two years, you have to keep a good credit history and not have had any unpaid bills.
You can see how your credit has improved through a credit report. It lists the history of your accounts, when the account opened, the current balance, the highest balance, and when any late payment was made. The report also lists closed accounts, the date closed, and sometimes the reason the account closed.
In addition to the credit report (which will include your mortgage payments if you already are paying for a house), it would help to show you have paid your rent on time for at least two years.
With good credit habits for two years after bankruptcy filing, you can probably qualify for a FHA loan which has interest rates only slightly higher than regular mortgage interest rates.
In addition to having good credit for at least two years after filing bankruptcy and paying a higher mortgage interest rate, you will probably need to make a substantial down payment. It could be as high as 20%. You may not be able to save that much in two years. Another way to come up with the down payment is to borrow from relatives or ask them for a gift. After you have financed the house, you can take out a 2nd mortgage and repay the relatives.
If your relatives are giving you a loan for down payment, you need to disclose that to the lender before closing. Lenders have regulations about where a down payment comes from. If you lie, it could be considered defrauding the lender.
All hope of owning a home is not lost if you have filed bankruptcy. You can work to rebuild your credit. There are mortgage lenders who will work with you. You may have to save longer, pay more, and wait a while, but you can eventually own a home.
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