How to get a mortgage after declaring bankruptcy

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People that have bankruptcy records can only feel the fear of being unable to return to normal financial life. However, these dark days are just a phase, not a permanent dishonor on the credit or civil report. So, if you know to follow the proper ways, then it is possible to buy a new home or property after bankruptcy. In this article, we’ll read about How to get a mortgage after declaring bankruptcy.Read more about rental property mortgage loans.

So, Here we are going to discuss how you can buy a property even after bankruptcy. Then we talk about the waiting time for buying the house after bankruptcy and how you increase your success rate to get a mortgage. 

How to get a mortgage after declaring bankruptcy

The Amount of Time to Get Mortgage after Bankruptcy:

You have to wait after bankruptcy to get a mortgage until the court discharges your bankruptcy. So, the mortgage application can be dismissed if the requirements do not match the bankruptcy. Now the question is how long it can take to get a mortgage. So, the time depends on the bankruptcy type on your previous record and your required loan type.

Chapter Seven Bankruptcy 

Chapter 7 bankruptcy is the most common among all types of bankruptcy. The judge erases your debts of qualifying during this bankruptcy. Therefore, your credit and credit score will reduce, unfortunately. You need to wait more than three years at least after the courant dismisses or discharges your bankruptcy. So, after the court hearing, you will be able to get a conventional loan. Government mortgages or loans usually put lenient conditions on bankrupt borrowers.

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Chapter Seven Bankruptcy

A mortgage is easier to get in chapter 13 bankruptcy if you compare it to chapter 7. So, it recognizes your debt instead of erasing it. Therefore, you have to make payment on the scheduled date to your existing creditors. On top of that, it does not affect your credit score that much. So, you can easily keep all your assets.

The court handles your chapter 13 bankruptcy and gives you a time from when you can get a mortgage or conventional loan. However, you must wait a minimum of four years to apply for a mortgage or loan if the judge dismisses the bankruptcy. If the judge discharges the bankruptcy then you have to wait four years from the application date and two years from the court hearing date.

Mortgage Type after Bankruptcy

There are no rules excluding people permanently from gating any certain kind of loan, who experienced bankruptcy in the past. So, you are free to apply for any kind of mortgage or loan if you wait for the required time mentioned above. On top of that, after the waiting period is over you may qualify for easier and better mortgage loans. 

Mortgage Applying Process after Bankruptcy:

Here we are going to discuss the key steps you must follow to apply for a loan after bankruptcy:

Credit Report (Step 1)

If your credit report shows bankruptcy, then it will lower your civil and credit score. If your credit score is lower than 600 then you need proper time to fix your debt issue and increase your credit score. After increasing the score you must check what the credit requirement of your loan lenders is. Check out the loan calculator with amortization schedule

So, follow these steps to rebuild your credit:

  • You must re-established the credit. So, get a secured credit card first. Therefore, you can start fresh after the 13 or 7 bankruptcy. This is one of the best processes for re-establishing. So, you have to deposit some amount to the credit card company to open a secure credit card. The deposited amount is your line amount on the card. So, you can make any kind of payment after that using the card and pay the card bill (debt) every month. On top of that, you can apply and easily get a secured card even after your bankruptcy.
  • Put down all the debts little by little. Try to focus and calculate extra chases that you used for paying all debts to close your bankruptcy. Therefore, it helps you to create a better financial reputation towards creditors and they believe you will increase your score slowly over time. However, you qualify for a loan or mortgage if your amount of debt is low.

Write an Explanation Letter for Bankruptcy (Step 2)

Lenders are well aware of the risk before they issue a loan or mortgage. So, your mortgage will look into your overall financial situation to ensure, that you are capable of paying the monthly mortgage payment or not.

Everyone knows that bankruptcy is a dishonor in a major financial dishonor but surely not a permanent one. Write a proper explanation letter and this is how you can increase your chances of successfully getting your required mortgage after bankruptcy. So, the letter shows the details of your financial situation and the reason for declaring bankruptcy.

You must include how your financial life drastically changed and how the circumstances affect your success since the incident. Also, show sincerity by explaining future steps to prevent further bankruptcy (such as building emergency funds and paying off all debts on time). 

Even though this letter is not a requirement to get the loan or mortgage but it helps lenders to see the bigger pictures you have set instead of a few numbers. So, attach the explanation letter with the loan application paper to request approval or preapproval.

Get Preapproved (Step 3)

After you complete the letter-writing period, now you should apply for preapproval of the required mortgage. This is a letter that lenders issue. So, it tells you the amount of money he can issue for your mortgage loan. Therefore, this approval is important for many reasons:

  • This allows you to search for a property by letting know the exact homes or stages in your budget.
  • The sellers and real estate agents can see that you can gather a fund to make a bid and buy your selected house through this preapproval letter. So, this is a necessary consideration after the incident of bankruptcy.

After you apply for approval the lender will demand some necessary documentation. If you already attached the necessary document with the application paper then it will help you to get preapproval quickly. 

Your lender surely asks you for W-2s, pay stubs, bank statements, and a few other documents. 

Always remember prequalification and preapproval are different things. You don’t need any asset verification for prequalification. So, it proves it is less relevant than the approval. Therefore, make sure you are not prequalified but preapproved for sure.

Lender Inquiry Response (Step 4)

Now it is time for the lender to make a move after you apply for pre-approval. So, they will all your important financial document such as assets, debt, credit, and income to check your check if you are qualified enough to get a mortgage or not. So, after checking everything if he like you as a candidate then he will issue a pre-approval letter to you. Therefore, you can start showing only from your location using this latter.

Your lender can contact you anytime to ask your credit-report-related questions and items on the report. This is usually a common thigh after an incident like bankruptcy. So, you must be honest with your lenders and corporate to get quick approval.

How to get a mortgage after declaring bankruptcy: Conclusion

Getting a mortgage or conventional loan is possible after bankruptcy. However, You need to wait a long amount of time and it depends on discharge and dismissal from the court. The type of bankruptcy also influences the mortgage money and time. However, you can easily follow the above article to educate yourself about mortgages after bankruptcy.