In the current lending environment, qualifying for a mortgage is tough enough even with perfect credit. Questions we often get asked are, “How do you develop after bankruptcy credit?” and “Is there a post bankruptcy mortgage loan available? Is it even possible to get a bad credit mortgage any more?If so, what is it and how do I get it?”
The good news is that there are very specific guidelines related to after bankruptcy mortgage loan products as defined by HUD, Fannie Mae, Freddie Mac, Ginnie Mae and the Veteran’s Administration. While getting a post bankruptcy loan can seem like an exercise in futility, if you know the rules of the game it can actually be easier than you think.
The key things to understand before wasting time are:
1. What type of bankruptcy did you file? Chapter 7 or Chapter 13?
2. If you filed a Chapter 7 Bankruptcy, has it been discharged? If so, when? This date is critical to your post bankruptcy mortgage loan qualification as mortgage lenders typically require a minimum of two years seasoning from the discharge date of a Chapter 7 or Chapter 13 bankruptcy before they will lend money to you again
3. If you filed a Chapter 13 bankruptcy, was it dismissed, discharged or are you still paying on it? Ideally, you want a Chapter 13 bankruptcy paid out and completely discharged. The two year seasoning rule from the date of discharge typically applies to Chapter 13 bankruptcy filings as well.
4. Was there a home included in your bankruptcy filing? If so, was the property foreclosed on or did you reaffirm the debt and continue paying on the mortgage? Many people mistakenly think that if you include a home in a bankruptcy that this protects you from the foreclosure process. This simply isn’t true. It only forestalls the process while a “stay” of pending litigation is put into place with all creditors. In other words, it stops the foreclosure process temporarily until the mortgage lender files a motion to lift the stay and then the foreclosure process starts all over again. In the end, unless the debt is reaffirmed or paid off, though a bankruptcy was filed, you will end up with a bankruptcy and a foreclosure on your credit report. Post bankruptcy mortgage loan guidelines now typically mandate at least 3 years seasoning from the date of the foreclosure sale.
This helps illustrate an excellent point that we cannot hammer home enough and that is that it is imperative to begin your credit restoration plan and immediately begin generating new positive credit after bankruptcy filings. A good way to do this is to get an after bankruptcy credit card.Obviously, you will want to discuss your options with your bankruptcy attorney based on the type of bankruptcy you file as there are different guidelines for a Chapter 7 bankruptcy and a Chapter 13 bankruptcy with what you can and cannot do during the process until discharge or dismissal.
Credit restoration is a comprehensive process that must begin with a well developed plan. There is a great deal of misinformation in the marketplace related to credit restoration and credit repair. This is why we developed Credit Repair College, to show you, step by step, how to develop a comprehensive credit restoration plan. Credit report repair takes time, but you can do it!
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