It could take several years.
You’ll probably need to go to a sub prime lender to obtain financing for your home if your bankruptcy is less than two years old. Your rates will be higher, on average about 12% higher than conventional rates. However, after two years, conventional lenders will consider your loan application.
From the perspective of the mortgage lender, someone who’s gone through a bankruptcy is operating with a “clean slate”. More than likely all previous debt, or the better part of it, has been either erased or paid off. To that end the mortgage lender is looking at the applicant as someone who has more money to spend in the future, not someone who has money problems in the past. You also have to remember that a mortgage is a secured loan. Like all secured loans the front end payments go primarily to interest while the backend payments take care of the principal. So, if someone is going to default on a home mortgage the banker is going to actually be paid first.
Give yourself a chance.
If you have the cash consider a down payment of up to 50% when applying for a mortgage. This can actually lower that extremely high interest rate during the first two years as well as provide you with a smaller monthly mortgage payment. You’ll also want to show a cash reserve of between two and three months in the bank when applying for the loan.
An ARM, or “Adjustable Rate Mortgage” will help you get temporarily lower rates. Applying for a shorter loan period, say, 15 years, can also lower your rate. Then, in a couple of years when your credit improves, refinance at an overall lower “fixed” rate.
When you get ready to apply for a mortgage, get all of the information you’ll need together in one place and make sure the entire numbers match. This will speed the process of applying to multiple lenders, especially online, where you can actually get a preliminary decision in as little as ten minutes.
Credit counseling is now the law.
The 2005 Bankruptcy Act now requires everyone who files for bankruptcy to undergo credit counseling within six months before filing and to complete a financial management instructional course after filing bankruptcy. Most often, the cost for filing Chapter 7 bankruptcy is $274. This fee is never waived but can be pay in a series of installments. Also, the $189 fee for a Chapter 13 bankruptcy can not be waived either.
Will filing for bankruptcy affect your credit?
Bankruptcy will not make things worse for you credit wise. The fact that you’ve filed a bankruptcy can appear on your credit record for ten years; however bankruptcy wipes out old debts. This means you’re likely to be in a better financial position. You may even be able to get new credit.
To begin with, you might use a bank or debit card to perform activities for which you normally would use a credit card. You may also get a secured credit card which is backed by your own bank account. Public utilities cannot, under Washington state law, refuse or cut off service because you have filed for bankruptcy. However, a required deposit for future service may be asked for.
Did you previously lose your license?
If you lost your license solely because you couldn’t pay court-ordered damages caused in an accident, bankruptcy will actually allow you to get your license back. If someone co-signs a loan with you and then you later file for bankruptcy, the co-signer often times has to pay your personal debt. Likewise, your spouse will still be liable for any joint debts.