How to Qualify for Mortgage Financing after Bankruptcy
If you don’t already know, bankruptcy will reduce your credit score by up to 100 points or even more. Further, it takes at least 2 years, and sometimes even 3 years to get the credit score needed to qualify for financing after declaring bankruptcy. Note that after bankruptcy, you will not qualify for mortgage until you fulfill the set Chapter 13 payment obligations since the bankruptcy laws that were enacted back in 2005 bans debtors from seeking credit in the course of the payment phase without a court approval. Of equal importance to note is that Chapter 13 payment plans last for up to 3-5 years, a time which you can take advantage of and aim to repair your damaged credit. This you do by conforming to bankruptcy plans and ensuring you pay all your bills on time.
Further, the new bankruptcy laws expect debtors to get into some credit counseling of some sort before any petition is confirmed. This is equally a heaven-sent opportunity in which you can expand your financial knowledge and develop concrete money management skills to help you in your future financial endeavors. If you file for mortgage bankruptcy so you can stop foreclosure but still lose the property later on you may not really qualify for mortgage for at least 5 years.
A seller-financing contract would normally last between 1 and 5 years and expect the borrower to get bank financing upon the expiration of the contract. It goes without saying that to qualify for a mortgage at such a time will be very hard since there will still be that stigma attached to you as being untrustworthy with loans and mortgages. However, if you do take control of your personal finances and show a positive payment history for a significant period of time, you can considerably improve your odds of approval.
In case you buy property using a seller-finance contract, ensure you keep detailed payment records. This is because sellers who engage in ingenious financing strategies would rarely report the payments made to the leading credit bureaus. So you would be better off with clear and detailed records of your payments. On the same note, if you are in the process of repairing your credit, you should get a copy of your personal credit report from the three leading credit bureaus today i.e. Equifax, Trans Union, and Experian. Keep in mind that creditors would rarely file their reports with all the bureaus, so you shouldn’t be surprised to find some variations in your credit report.
Filling for bankruptcy will undoubtedly wreak havoc on your credit report, so you should be committed to being very proactive in restoring a perfect credit rating. Further, you should aim at achieving a 720 or even higher FICO score so you could qualify for mortgage after bankruptcy.