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By Carrie Reeder
Each year, millions of people file bankruptcy as a means of
erasing their consumer debts. While this approach may relieve
stress, a bankruptcy is damaging, and will hang over your head
for the next ten years. Still, it is possible to overcome
bankruptcy. The key is making smarter financial and credit
decisions. With this said, some people choose to purchase a
home after a bankruptcy. Here are a few pointers to consider
when buying a home.
Reasons to Delay the Buying Process after Bankruptcy
If you consult with mortgage or financial experts, they will
likely discourage you from buying a home following a
bankruptcy. After your bankruptcy is discharged, there is a
black cloud that looms over your credit report.
When any prospective lender reviews your report, they will be
notified of your recent or past bankruptcy. In some instances,
this justifies an immediate denial. On the other hand, there
are lenders eager to help you establish or rebuild your
credit.
Thus, they will approve a loan request. Nonetheless, the
penalties are steep.
Higher mortgage rates can be anticipated when purchasing a
home
after bankruptcy, especially if you have not established other
credit accounts. Mortgage lenders consider two factors: credit
scores and credit reports.
Although a bankruptcy appears on your credit report, having a
high credit score will increase your odds of getting a
comparable rate. Unfortunately, if you buy immediately
following a bankruptcy, you will not have the opportunity to
boost your score.
Reasons to Buy a Home after Bankruptcy
Lenders will approve mortgage loan applications one day
following a discharge. Therefore, it is possible to get a home
after a bankruptcy. Buying a home is perfect for rebuilding
credit. Moreover, it is the quickest way to increase your
credit score.
After a bankruptcy, the average person has a credit score
below
600. Good credit consist of credit scores 650 and above.
Maintaining current mortgage payments will gradually increase
your score. After two years of regular payments, you will have
established a good payment history. Hence, you may qualify for
a low rate refinancing, which may lower your mortgage
payments.
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