One of the most commonly asked questions that we receive is: will I be able to buy a house sometime in the future? I have had many clients who have been able to buy a house after a Chapter 7 bankruptcy. There are some steps you can take to help you be successful in obtaining a mortgage after a bankruptcy.
1) The first step you need to take is clearing your credit report of all the negative information that may be on it currently Despite what you may have heard, one of the most effective ways of cleaning up your credit report is to get rid of the debt through bankruptcy. Check out my article on how bankruptcy affects your credit report. Then you need to monitor your credit report at least once a year, every 6 months is even better. You can get a free copy of your credit report once a year from www.AnnualCreditReport.com. Make sure that the information being reported on your credit report is correct.
2) You need to raise your credit score. The best way to raise your credit score is by having credit that is paid on time. Making payments on student loans is a great way to raise your credit score since the loan agencies do report to credit reporting agencies. Having a small credit card that you pay off monthly can be another way to help to raise your credit score.
3) Make sure that you are not doing anything to hurt your credit score. One of the ways to damage your credit score is to fail to make child support payments. While Division of Child Support Enforcement does not report on-time payments, they do report payments that are behind. Another way to damage your credit score is by not paying your student loans. Prompt payment of student loans will help your credit score, but failure to pay will damage your credit score. Of course, you also need to make sure that you are staying current with other credit, like car payments and credit card payments.
4) You need to save some money for a down payment on a house. Many mortgage companies now require that you make a down payment when purchasing a house. This helps to lessen the risk that the mortgage company is taking by reducing the amount of the mortgage versus the value of the house. It used to be that you could get a loan for 100% of the purchase price of the house. These loans are very difficult to get in the current mortgage market.
By following these practical tips, you can join the ranks of my former clients who are now homeowners after having filed a bankruptcy.
You can find additional information on getting a mortgage after a bankruptcy in our article.
If you need to clean up your credit so that you can buy a home, please contact Hampton Roads Legal Services or call us at (757) 276-6555 to schedule your free no-obligation appointment. We will show you how bankruptcy can put you in charge of your finances.