It can be difficult to deal with a bankruptcy from an emotional and a credit perspective. No matter what chapter you file for, your credit will probably be affected. You will reduce or eliminate your debt, but this will have an effect on your ability to get credit in the future.
Even so, it is not impossible to purchase a Albuquerque home after bankruptcy. But you’ll need to plan ahead, prepare, and be patient.
How Long Until You Can Buy a Home?
How long does it take after bankruptcy to buy a home? This is a big question for a lot of people.
In order to qualify for a home loan, your bankruptcy must be discharged. In the case of a court-ordered discharge, you are released from any legal obligations on debts that the court has determined should be discharged and creditors are prevented from attempting to collect them.
Discharge of debts by bankruptcy is just one aspect of bankruptcy, and it does not mean the bankruptcy case is closed. Before approving your next mortgage, lenders will want to see your discharge. Usually, bankruptcy court cases are concluded pretty soon after the discharge is approved.
What Does Your Credit Report Look Like?
After you have filed, you should monitor your credit report. Bankruptcy filings can be held for up to ten years, but it is incorrectly regarded that applicants must wait for that long before obtaining a new loan.
Getting a mortgage requires you to make sure you don’t overspend and to scan your credit history for any debts that have been paid off or discharged.
As you rebuild your credit following a bankruptcy, ensure that you address outdated and incorrect information. You need to demonstrate to lenders that you have recovered from bankruptcy and are not too risky in order to qualify for a mortgage post-bankruptcy.
Regardless of how an individual’s credit score will be affected after filing for bankruptcy, there is a possibility of the credit being limited. You can restore it by using a secured credit card or a small installment loan.
When it comes to how long bankruptcy affects your credit, it varies. Chapter 7 bankruptcy stays on your credit report for up to 10 years after you file.
Because you make payments under a court-approved program, chapter 13 bankruptcy has less stigma in the eyes of lenders. Your credit report should no longer reflect a chapter 13 bankruptcy after seven years.
How Long Should You Wait?
You may need a minimum of two years to right yourself after a bankruptcy, but there’s not a hard-set time you should wait before applying for a mortgage.
There are a few reasons for this. First, your credit can actually improve with two years’ time. This means you’ll not just qualify for a mortgage but also get better terms.
Even slight changes in your interest rate can have a huge impact on your monthly payments and loan payments.
If you faced bankruptcy and are under-resourced for a down payment, you may be able to secure an FHA or VA loan. The FHA doesn’t make the loans, but they guarantee loans from private lenders, reducing the risk for the lender.
There is a waiting period.
If you file a chapter 13 bankruptcy, you might be eligible for an FHA-backed loan in a year if you keep making all your payments in the bankruptcy on time. If you file under chapter 7, an FHA-backed mortgage might be an option in two years if you have met the credit requirements.
You’ll need court permission to take on new debt while in chapter 13 bankruptcy.
The Department of Veterans Affairs offers qualified veterans and service members VA loans, which require two years’ probation after a discharge under chapter 7 bankruptcy, as well as meeting minimum credit score requirements.
Finally, if you’re thinking about a conventional loan, you might have to wait anywhere from 24 to 48 months to qualify following a chapter 7 bankruptcy. With a chapter 13 bankruptcy, most lenders will make you wait 24 months after discharge.
Make sure to join us twice a week on our blog for more real estate advice and great reasons to buy a home in Albuquerque and the surrounding area. Follow us on Facebook for the latest Albuquerque real estate updates. Looking for the perfect home for sale in Albuquerque? Our easy-to-use home search tool can help you start the process. Contact us today to help you buy or sell your next home in Albuquerque.
HOT HOME LISTING OF THE WEEK!
Heaven in North ABQ Acres! Spectacular Custom Built home, designed by Eric Spurlock. Enter through private courtyard. The flowing floorplan offers soaring herring bone beamed ceilings and expansive great room makes this a wonderful home for entertaining. Chef’s kitchen offers all Viking Appliances, island with gas cooktop, opens to a Morning room with Kiva Fireplace, sitting area and a breakfast nook. Also opens to an outdoor patio. Formal dinning room, with entrance to private Wine tasting room, temperature controlled, space for 100s of bottles w/racks and wine storage. Seating for conversation. Owner’s suite on main level offers tray ceilings, sitting area, access to outside patio.
Contact the Sandi Pressley team for additional details!
Get your Morning Inspiration with the Sandi Pressley Team