Mortgages After Bankruptcy

Mortgages After Bankruptcy

Credit Factors To Consider Before You Buy Your Dream Home

Have you ever been in the position of applying for a mortgage after a bankruptcy? There are many considerations that you must make.

When considering taking out a mortgage after bankruptcy it is a good idea to realize that the lenders take a very close look at how the borrower has handled finances in the recent past. Depending upon your actions over the past 12 to 24 months, there may be good news.

Strategies that indicate a recovery from bankruptcy include reestablishing old accounts, establishing a solid record with new accounts, regular contributions to a savings plan, and payroll deductions that go into your children's college fund.

Similarly, numerous slow payments and collection accounts just a few years ago, followed by a recent good payment record, make those newer numbers look even stronger.

Here's a tactic that will help anyone who has been plagued by credit problems but who wants to demonstrate creditworthiness and receive a mortgage after bankruptcy. Get a secured credit card, or debt card. A bankruptcy or a record of seriously slow payments and collections is like a dead skunk in the middle of the road to credit card companies and mortgage lenders. They want to get as far away from you as possible. A number of banks, however, will provide you with a credit card that operates like an automated teller machine or ATM card. Although the limit is tied to the amount of money available, just as a check is, the record of payment on the account is reported like that of any credit card.

You can get a mortgage after bankruptcy and you can build good credit without having any credit extended to you. If you have had credit problems, no doubt one of the banks that offer this service has sent you a promotional mailing or will in the near future. This is not a scam. This is a legitimate method of rebuilding your credit.

Elements of Credit Scoring to Consider with a Mortgage after Bankruptcy

The complex formula for scoring assigns the greatest weight to the absence of problems. Financial problems bring your score down according to which problem or condition is noted and how old it is. Some of the problems and conditions to consider with mortgage after bankruptcy that reduce your score are as follows, according to the Beacon system.

1. Current outstanding accounts

2. Not all account paid as agreed

3. Too few bank or national revolving/open accounts.

4. Number of accounts with outstanding balances

5. Number of finance company accounts

6. Recent payment history is too new to rate

7. Length of time accounts have been established

8. No non-mortgage account balances, or non-mortgage balances not recently reported

9. Number of accounts currently or in the past not paid as agreed

10. Too few accounts currently paid as agreed

11. Amount past due on accounts

12. Account not paid as agreed, public record, or collection agency filing

These are just a few of the issues that are considered with a mortgage after bankruptcy, or any type of mortgage loan for that matter.

Your bankruptcy should be at least 2 years since it was discharged to start the process of looking to buy a home. This 2 year period is an opportunity for you to re-build and establish a good credit record so that you can get a mortgage after bankruptcy and purchase your dream home.