For many, bankruptcy can provide a much-needed sense of freedom following years of what feels like drowning in debt. However, you may be dismayed to learn that your bankruptcy filing can have a significant impact on your ability to obtain a mortgage. As such, it’s imperative to understand what you should know about this process, such as what the waiting period is and how you can start rebuilding your credit. You’ll also discover the importance of working with a Montgomery County bankruptcy lawyer to help you explore your legal options.
Is There a Waiting Period to Obtain a Mortgage?
When you file for bankruptcy, it’s imperative to understand the impact it can have on your ability to get a mortgage. In general, you will be subjected to a waiting period for conventional loans, as well as Federal Housing Administration or Veterans Affairs loans. Additionally, the waiting period you must endure will depend on the bankruptcy chapter you’ve filed.
In general, if you’re applying for a conventional loan, you must wait at least four years after Chapter 7 or two years after Chapter 13. For those eligible to apply for loans through the FHA or VA, the waiting period is halved to two years after a Chapter 7 case or one year following Chapter 13.
However, there is one final option that allows you to bypass these waiting periods. If you apply for a non-qualified mortgage, you can generally obtain the loan so long as you can afford the astronomical interest rates and considerable down payment. Unfortunately, the vast majority of consumers are unable to meet these terms, however, let alone those who have just recently finished their bankruptcy case.
What Can I Do to Improve My Credit While Waiting?
Though it can be disheartening to learn you must wait to obtain a mortgage after bankruptcy, it’s imperative to understand that you can use this waiting period to your advantage by taking steps to improve your credit score. In general, one of the most important things you can do to help rebuild your credit after bankruptcy is to set a budget and stick to it. Unfortunately, many people are overcome with relief and financial freedom after this process, and do not take the necessary steps to set a strict budget. As such, they fall right back into the vicious debt cycle.
Another step you can take is to apply for credit builder loans. These are generally small loans with high interest rates that those with low credit scores can obtain in order to work on rebuilding their credit. By making on-time payments over a year or two, you can start to build a positive credit history.
You may also want to become an authorized user on a friend’s or family member’s credit card, as this can help you improve your credit score. When they make payments towards the card, it can reflect on your credit, helping increase your score.
Filing for bankruptcy can often feel like an impossible choice. That is why it’s imperative to connect with an experienced attorney with Mudrick & Zucker, P.C. to help you through this complicated process. Our firm understands how many considerations must be made before filing, which is why we are here to walk you through your options so you can make the best decisions for your circumstances. Contact us today to learn more.
