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Bankruptcy Law Blog

Monday, October 16, 2017

Getting A Mortgage After Bankruptcy

Unless you find a leprechaun’s pot of gold, the only way you are ever going to be able to buy a house is to get a mortgage. But going into debt after going through a bankruptcy can be sort of scary. You know that things can get out of control quickly if you make a couple of wrong decisions. But on the upside, you probably learned a few things the first time around that can keep you out of trouble going forward. In this blog, we’ll go over some things to consider and steps to take if you want to get a mortgage after filing for bankruptcy.

Hopefully one of the lessons you learned from going through the bankruptcy process is that the type of debt you have, and who your creditors are, matters. In order to get a low interest loan from a reputable bank, you are going to have to prove that you have cleaned up your financial act.

First things first, you need to go on a budget and stick to it unless an emergency forces you to deviate from it. Use the budgeting process to figure out how much money you can realistically afford to pay for housing costs each month and consider that when you start shopping around for a home loan. Remember there are lots of costs that homeowners have to shoulder that renters do not, so give yourself a bit of a cushion here.

If possible, you should budget in a deposit into a savings account each month. You can draw from this fund if you have an emergency, which will keep you from going over budget when bad things happen. And you can use this savings as a down payment on a home. The bigger down payment you can do the better!

You should also work on improving your credit score. Your credit score is one of the biggest factors lenders consider when deciding whether to loan you money, and at what rate. The better your score is, the easier it is to get access to credit, and the better terms you will be offered.

Filing for bankruptcy wrecks your score, so improving your score can be a real challenge. Start by inspecting your credit reports to see if there is any false or outdated information on there. If there is, report it to the credit agencies so they have a more accurate picture of you. Then, work hard to pay all of your bills on time and in full each month by sticking to your budget. You may also want to consider getting a credit card that you can use and pay off in full each month to demonstrate you are financially responsible. Paying bills on time and using credit responsibly are key parts of your credit score.

Getting all of these things done takes time. Which is okay. Most mortgage lenders won’t work with someone who has filed for bankruptcy until two years after the bankruptcy case was closed. This gives you time to get used to budgeting, save up money for a down payment, and build up your credit score.


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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”