Getting a Mortgage after Bankruptcy

September 9, 2013

Bankruptcy and MortgagesBankruptcies create many limitations with financial freedom; however there are ways to recover and even obtain a mortgage after this life changing event. It may be difficult to receive direction on rebuilding after filing; however, there are ways to restore their financial situations after bankruptcy. These simple steps will help a bankruptee recover and become a homeowner again in the future.

Get Credit Report

Obtain a copy of your credit report and review each item carefully. Most times credit accounts that are absolved with your bankruptcy are not removed from your credit report. Contact each reporting agency individually (Equifax, Experian, and Transunion) and obtain a copy from each one. Look for any derogatory credit items and send copies (not the originals) to all three of these reporting agencies, and ask them to remove any inaccuracies. This can be done online or by mail, and there may be a small charge implied by the agencies for this request.

Pay Bills On-Time

It is important to pay all of your bills on time going forward. Since bankruptcy is a means to financial recovery, it is your chance to “start over” financially and prove that you are responsible enough to do so. Should you be having any troubles with an upcoming bill, call your creditor in advance and let them know what challenges you are facing. Do not wait for the due date or for them to contact you. Be proactive not reactive.

Re-establish Credit

Start to re-establish credit lines by applying for credit cards. Most likely for a new dischargee, you will be approved based on a secured card. A secured card requires you to make a deposit on your account and then borrow against it to establish payment history. Should you prove to be a responsible credit holder, the credit card lender may increase your credit limit to an amount greater than your deposit, and then eventually return your deposit to you. If you are not able to handle having credit, it is likely not a recommended option for you.

Prepare References

Prepare non traditional trade references to aid in rebuilding your credit. These are accounts such as cell phones, car insurance and store accounts. Although they may not be visible on your credit bureau history, they will aid in providing a reference for a loan officer. The best way to prove this history is by having at least a 12 month history and asking for a letter from these references stating that you have had positive repayment history for the last year.

All of these steps will help prove to financial institutions that you are ready to rebuild your credit. It may take a few years, but financial recovery after bankruptcy is possible. Once your financial record is back on-track, you may qualify for better mortgage rates. The power is in your hands to learn from this experience and use the lesson as a stepping stone to a brighter future.