Every year, millions of individuals file for bankruptcy as a way of removing their consumer debts. While this method may get rid of stress, a bankruptcy is harmful and will overhang your head for the next decade. Yet, it is likely to overcome bankruptcy. The key is making better credit and financial choices. With this in mind, some people decide to buy a home after a bankruptcy. Here are some pointers to consider when purchasing a home.
Reasons to Delay the Buying Process after Bankruptcy
On the chance that you ask mortgage or financial experts, they will possibly discourage you from purchasing a home after a bankruptcy. After your bankruptcy is discharged, there is a black cloud that looms over your credit report.
When any potential lender evaluates your report, they will be alerted of your current or past bankruptcy. In some cases, this justifies an instant 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.
Upper mortgage rates can be expected when buying a home after bankruptcy, particularly 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. Unluckily, if you buy instantly following a bankruptcy, you will not have the chance to increase your score.
Reasons to Buy a Home after Bankruptcy
Financiers will approve mortgage loan applications one day after a discharge. So, it is possible to buy a home after a bankruptcy. Buying a home is just 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 consists 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.