Obtaining a mortgage after a discharged bankruptcy

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People turn to filing for bankruptcy when the debt becomes too much for them. It relieves them of some of their debts and protects them from lawsuits, and repossession but this can affect their ability to get loans and credit cards. Bankruptcy lowers credit scores and remains in the credit record for about 0 years, however the impact lessens with time. Before you can be considered for a loan, your bankruptcy needs to be discharged and the discharge comes as an order from a court eliminating your debts. Lenders check your report to also access your credit worthiness. Ensure you check your credit report before applying for a loan and find out if there are mistakes which would be addressed immediately.

While applying for a loan, the lender will ask you questions about your bankruptcy to find out when it was discharged, what you did to e stablish a new credit, and how you have been handling your bills. You should prepare answers to these questions beforehand. Different types of bankruptcies affect you differently.

Chapter 11: Reorganization

Chapter 11 bankruptcy is used by businesses and canalso be filed by individuals who have more than enough money to qualify for Chapter 7 filing or have more than the amount if debt allowed in chapter 13 bankruptcy. Provided you have stayed long enough for the bankruptcy to expire, you can get a mortgage.

Chapter 7: This type of bankruptcy allows you sell your properties to settle your credit card debt, personal loans , medical bills and others. Although it will be seen in your credit report, for about ten years, you can still get a mortgage even with it. You just need to ensure that enough time has elapsed and that you have enough deposit before you can apply for a mortgage loan.

Chapter 13: Adjustment of Debts

Chapter 13 bankruptcy gives you the chance to clear some parts or all of your debts within a specified period of time typically five years and the remaining part if the debt gets cleared when the repayment period passes. It can stay on your report for about seven years and you will need to request for permission from your bankruptcy trustee , who is the person that oversees your repayment to people you owe, before you can request for a mortgage.

After bankruptcy, there are varieties of loans you can apply for and each of them have different set requirements and they are as follow:

Veteran Loans

This loan is available to veterans or people who are currently serving in the military. It does not require a down payment or a mortgage insurance payment and it also offers a low interest rate. There is a funding fee attached to this, however and the requirements include two years post bankruptcy discharge if it is chapter 7 bankruptcy, one year post bankruptcy discharge if it is chapter 13 bankruptcy and no waiting period if it is chapter 11

Federal Housing Authority Loans

FHA loans are managed by the federal government and will allow you to purchase a house with a 3.5% down payment, however, you will have to pay mortgage insurance which ends up raising the cost. To get FHA loan, you have to stay for about two years after your bankruptcy has been discharged (for chapter 7 bankruptcy), one yet after your bankruptcy has been discharged (for chapter 13 bankruptcy) and chapter 11 bankruptcy has no waiting period.

U.S. Department of Agriculture (USDA)

This type of loan is designed for rural borrowers who have metthe income requirements. This type of loan favors people who want to have honest in rural areas and earn modest income. One good thing about this kind of loan lies in the fact that you can get it without a deposit. Heir requirements include three years pot bankruptcy discharge if it is chapter 7 bankruptcy, one year after discharge date if it is chapter 11 bankruptcy and no waiting period if it is chapter 11 bankruptcy.

Conventional Loans

This type of loan are not insured by the government and they have strict requirements in place such as a good depositand a good credit rating. They also charge mortgage insurance if you are paying less than 20% of the cost of the mortgage. Their waiting requirements include for years from bankruptcy discharge if it is chapter 7 bankruptcy, or chapter 11 bankruptcy, and two years from the discharge date if it is chapter 13 bankruptcy.

To get approved for any of these loans after your bankruptcy has been discharged, you need to work on in proving your credit score before applying. You can create a budget to help you monitor your spendings and incomings, and also make plans to pay off your debts on time. You can also get a secured credit card which can help you build your credit score while you clear off your debts on time.

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FCA disclaimer

Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.