That is a question that most people wonder about. Refer Bankruptcy Network. You are probably aware that a Chapter 7 bankruptcy stays on buying a house your credit report for 10 years.
Truth is that many lenders shy away from lending money to people who have recently sought the protection of bankruptcy. But that actually doesn’t last very long. My clients find that after a year to a year and a half, the credit industry is back knocking at their doors with credit card offers, home loan offers, etc.
Recently, a client called 3 months after the bankruptcy filing and before her case was even closed, wanting to know if there was any reason she shouldn’t accept the credit card offer she had just received!
Mortgage lenders generally look at three things to determine legibility to get a home loan: FICO score, regular income level, and the percentage of the purchase price you are able to put down. After filing bankruptcy, your FICO score will take a dip. Often that is caused by late payments more than the actual bankruptcy filing. Generally, with no overdue payments anymore, the FICO score comes back pretty quickly a year or so.
The regular income level is based on your job and how long you’ve had it. Its easier to get a loan if you’ve been working in one place for a while on a steady income. The loan committee used to also take a close look at the amount your payments on the house will be in relation to your total income.
Thus, it used to be that you couldn’t get a loan if more than 30% of your income was going to go to the house payment. (Relaxing that standard so loans were given out based on 50 or even 60% on one’s income level was one of the contributing factors to the mortgage crisis we are currently facing.)
Finally, the amount you can put down towards the purchase of the house makes a big difference. The higher the percentage of down payment, the more protection for the bank. (Allowing minimal or no down payments and relying on appreciation were also factors that led to our current mortgage crisis.)
So, what does this mean? If you want to buy a house after filing bankruptcy, you can. If maybe you will need to wait a year or two until your income and expenses stabilize and until you can sock a few dollars away for a down payment, but that’s probably a sound economic policy anyway.
If you have questions about bankruptcy or foreclosure, consider calling Carolyn Secor. Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida. For more information, go to our web site www.BankruptcyforTampa.com or call 727-254-1704.