09/03/2010 Bankruptcy can destroy your credit score. Many individuals who have had to suffer bankruptcy fear that they will never be able to take out a mortgage again, making a home purchase impossible. This isn't true. There is hope for a mortgage after bankruptcy. Follow these three steps to get there.
1. Get your finances in order. If you've just gone through a bankruptcy, chances are that your overall financial situation is chaotic. Before you consider trying to take out a mortgage, you need to understand your own financial situation and organize it in a positive, effective way. Pay off any remaining debts as fast as possible. Don't make any late payments. You must establish consistency and reliability. Your credit report must show that you are financially responsible. This is the first, most important step.
2. Save as much as you can. This will be difficult. You'll have to make sacrifices, especially if you're dealing with a large amount of leftover debt. You'll need this money for two reasons. • You'll need to provide a higher-than-average down payment when you purchase your home in order to decrease the lender's risk of loaning money to you. A larger down payment will allow you to borrow less money overall, which will make qualifying for the funds that much easier. • You'll need this money to buy down your mortgage rate. With a bankruptcy in your history, you won't be able to take advantage of the best mortgage rates your lender offers. Some lenders, however, allow borrowers to pay points up front in exchange for a lower interest rate. In order to get a decent mortgage rate, you will likely have to pay points. You'll need extra cash on hand for this.
3. Don't hurry. The process of rebuilding your credit and your responsibility takes time. It will take years of work to prepare. Have patience. If you try to move too quickly, you might make mistakes and damage your credit score further. Your personal situation will determine much of your ability to borrow. Recognize that the process may be swift for some individuals but lengthy for others. Take the time to do it right.
