We all face significant financial challenges at one time or another. These may be the result of a catastophic illness or injury, a death in the family, a natural disaster, the loss of a job or simply poor money management. Nevertheless these unfortunate and sometimes unforeseeable events can ultimately lead to a Chapter 7 or Chapter 13 bankruptcy filing. Indeed, bankruptcy delivers a blow to your credit profile, however it is certainly not the end of the world. Contrary to popular belief, you can get a mortgage after you file bankruptcy.

In the past, borrowers could obtain subprime mortgages just one day out of bankruptcy. In exchange, they were often burdened with adjustable rate mortgages accompanied by costly prepayment penalties and higher interest rates. Borrowers were prevented from refinancing into more favorable loans or selling their homes in the immediate future without incurring significant financial penalties. These adjustable rate mortgages also resulted in higher housing payments when the loan reached the initial adjustment period which in turn created further financial difficulties for the already credit challenged borrower. The unforgiving loan terms would inevitably lead the homeowner down the certain path to foreclosure. Today the "one day out of bankruptcy" programs have been eliminated along with a multitude of subprime lenders who previously offered them.

Under current guidelines, the responsible mortgage lender is acting in the best interest of the prospective borrower while simultaneously protecting their own investment. Banks typically prefer to see a two year satisfactory credit history after the bankruptcy discharge date (or filing date if Chapter 13). Lenders are not particularly concerned with what happened prior to your filing, moreover they want to know what you've done since the discharge date. With re-established credit, most borrowers can obtain conforming or government insured fixed rate mortgages without large down payments and prepayment penalties.

Your New Credit Profile

Although you had credit problems in the past, do not make the mistake of swearing off credit altogether. If you want to purchase your own home in the future you should begin to re-establish your credit profile immediately. Above all, be sure to pay your rent or mortgage on time as the lender requires a 24 month history of timely housing payments after bankruptcy.  Be sure to make other payments (utility bills, cell phone, etc.) on time as well. Always save your receipts or cancelled checks for all payments as proof . Receipts and cancelled checks will be invaluable evidence in the event of any future dispute with creditors and may also improve your chances of qualifying for a mortgage.Cancelled checks for rent, utilities and installment payments can sometimes substitute for tradelines on your credit report. Get a secured credit card or take on some sort of loan furniture, a car or a major appliance to establish new tradelines on your credit report. Keep your balances below 50% of the available credit limit on all revolving credit accounts. Your credit profile will improve significantly as you begin to show a pattern of timely payments and responsible use of credit.

Get Mortgage Fit!

Review your credit report thoroughly before applying for a mortgage. All U.S residents are now entitled to a free credit report every 12 months from each of the three major credit reporting agencies. Go to www.annualcreditreport.com to receive your free annual credit reports from each bureau. Examine your credit profile carefully to ensure all information (especially your bankruptcy discharge date and all accounts included in bankruptcy) is reporting accurately. You can dispute incorrect information with the reporting bureau(s) either online or by mail. Be prepared to submit physical proof that information on your report is inaccurate. Physical proof of payment is invaluable in resolving disputes and having negative information removed from your profile. The credit reporting agencies are obligated to address your dispute within 30 days.

We will help you get "mortgage ready" with our mortgage fitness program. Call us today at 561.638.1505 for your complimentary one on one credit consultation.

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