Advice On Home Purchase After Bankruptcy

Home Purchase After Bankruptcy

Gustan Cho Associates

Qualifying For Home Purchase After Bankruptcy:

Both Chapter 7 Bankruptcy and Chapter 13 Bankruptcy filings soared to record numbers during and after the 2008 real estate and financial meltdown.  Millions of Americans filed Chapter 7 Bankruptcy and Chapter 13 Bankruptcies to protect them against creditors and debt collectors. By filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, it gave millions of Americans a fresh start on life.  Folks can get credit after bankruptcy and can qualify for home purchase after bankruptcy.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common form of consumer bankruptcy.  For those who lost their jobs and have substantial unsecured debts like credit cards with little to no assets, Chapter 7 Bankruptcy might be the best option.  Chapter 7 Bankruptcy can wipe out most of the consumer’s debts except for government loans, child support payments, and tax liens. I am not an attorney nor a bankruptcy expert so if you are contemplating filing bankruptcy, you should consult a bankruptcy attorney.

Going Through Chapter 7 Bankruptcy

A large percentage of my business consists of clients who have filed bankruptcy and/or have had prior bad credit.  A Chapter 7 bankruptcy eliminates a person’s debt completely and gives the person a fresh financial start in life.  A bankruptcy will drop a person’s credit score by more than 100 points, however, this drop is a temporary drop of their credit scores.  Their credit scores will naturally increase as months go by even if they do nothing to reestablish their credit.

Rebuilding Credit After Bankruptcy To Qualify For Home Purchase After Bankruptcy

A person who just filed bankruptcy should immediately start rebuilding their credit.  The fastest and best way of rebuilding and reestablishing their credit is by getting 3 secured credit cards with $500 credit limits.  Each credit card will most likely increase their credit scores by at least 20 to 50 points if the cardholder leaves at least a $10 credit balance on each card.  Use the card regularly but never have a credit balance over 25%.  The lower the balance the better but the balance should not be zero.  Keep the $10 dollar minimum.

Low Credit Card Balance Will Maximize Credit Scores

The reason we recommend to keep a $10 minimum credit balance is because to maximize your credit scores.  The basic formula the credit reporting agencies optimize this portion of your credit score is by dividing the balance of your credit card by the credit card credit limit.  The smaller the number the better but it cannot be zero.  For example, if you have a $900 balance on your credit card and the credit limit is $1,000, you would divide the $900 by $1,000 and you get a factor of 0.90 which is a high factor.  However, if you had a $100 balance on your $1,000 credit limit credit card, you get a factor of 0.10 which is a lower factor.  However, if you have a zero balance on your credit card balance and the credit limit is $1,000, anything divided into zero will yield zero so there will be no positive credit score impact.  That is the reason we recommend a $10 credit limit.

Waiting Period After Bankruptcy To Qualify for Home Loan

There is a 2 year mandatory waiting period for a home buyer to be able to apply for a mortgage loan in California, Illinois or Florida from the discharge date of your Chapter 7 bankruptcy.

Qualifying For Home Purchase After Bankruptcy: Waiting Period After Chapter 13 Bankruptcy

There is a one year mandatory waiting period for a home buyer to be able to apply for a mortgage loan after they have filed Chapter 13 bankruptcy.

If you filed Chapter 7 bankruptcy or Chapter 13 bankruptcy and are interested in being a homeowner, please contact me at 262-716-8151 or email me at gcho@gustancho.com.  You can also visit me at www.gustancho.com.  You can contact me even though your waiting period is not over.  I can help you in repairing and rebuilding your credit so that you will be able to qualify for a mortgage loan once the mandatory waiting period is over.

Related> Chapter 7 Bankruptcy

Related> Bankruptcy Process

Related> Mortgage After Chapter 13 Bankruptcy

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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