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Rebuilding Credit After Bankruptcy To Qualify For Mortgage

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Rebuilding Credit After Bankruptcy To Qualify For Mortgage

This BLOG On Rebuilding Credit After Bankruptcy To Qualify For Mortgage Was UPDATED On April 20th, 2019

By Gustan Cho

Many folks who just went through bankruptcy have a goal that they will never obtain credit ever again. Everything they purchase will be purchased with cash.

  • If they cannot afford it by paying it in full, they do not buy it
  • This is the mentality they have
  • This belief, unfortunately, will hurt them in them getting a mortgage loan in the near future
  • Rebuilding Credit After Bankruptcy is extremely important when it comes to getting qualified for a mortgage

Fastest Way Of Rebuilding Credit After Bankruptcy?

Everybody who files bankruptcy automatically assumes that just because they have filed bankruptcy that they cannot get credit.

  • This is normally true when it comes to unsecured credit such as unsecured credit cards
  • A bankruptcy will drop credit scores
  • Credit scores can drop by at least 100 or more points
  • The good news is that the credit score drop from the bankruptcy is a temporary drop
  • Over time, a bankruptcy on credit report will have less and less impact on scores
  • It is like having a major hangover
  • Over time, the alcohol in the body disappears and the hangover will be soon heal 
  • That is the case with a bankruptcy
  • Even if consumers get no credit, consumer scores will slowly creep up
  • However, adding positive credit and start rebuilding credit after bankruptcy will accelerate the process
  • There are cases where a person who filed bankruptcy has credit scores over 700 in just over a year
  • This is because they have re-established their credit scores

Secured Credit Cards To Rebuild Credit

The easiest and fastest way of rebuilding credit after bankruptcy is by getting three secured credit cards with $500 credit limit:

  • Consumers will not get approved for unsecured credit cards with credit scores under 700
  • The best way of rebuilding credit after bankruptcy is by getting secured credit cards
  • Secured credit cards are the savior for people who have just gotten their bankruptcy discharged
  • Each secured credit card can boost a person’s credit scores by at least 20 or more points right after a bankruptcy discharge
  • The ideal amount of secured credit cards a person should get is 3 secured credit cards with $500 credit limit
  • Use these credit cards regularly and pay them off every month religiously
  • As the secured credit card payment history ages over time, credit scores will improve greatly
  • The chances are that the secured credit card company will offer a credit line increase without having to put any additional deposit on secured credit card account as the card ages

How Bankruptcy Helps With Starting Debt Free Life

People can qualify for mortgage after bankruptcy. There are waiting period requirements to qualify for mortgage after bankruptcy on government and conventional loans. Non-QM Loans do not have any waiting period requirements after housing event and bankruptcy. Consumers who are drowning in debt can consider filing bankruptcy. Consult with a bankruptcy attorney:

  • Bankruptcy is a federal law that protects a consumer against creditors
  • Gives consumers a second chance to start their financial life
  • All debts such as judgments, wage garnishments, and bank account garnishments, collections, charged off accounts are wiped off
  • A person who files for bankruptcy and has their bankruptcy discharged is a debt-free person
  • They no longer have to worry about owing anyone anything

Bankruptcy Is Viewed Favorably By Lenders And Creditors

Many creditors view a person with bankruptcy more favorably than borrowers without a bankruptcy but many outstanding collection accounts.

  • Once a person files for bankruptcy and has had their bankruptcy discharged, they no longer have to worry about an old creditor coming after them to garnish their wages, place liens on their assets, or have a judgment against them
  • Once consumers file bankruptcy, they cannot file another bankruptcy for at least 7 years from the discharge date
  • People who recently had a bankruptcy discharged often can qualify for a car loan and other forms of credit
  • Granted, a person who has a recent bankruptcy will most likely get a higher interest rate than a person who has not had a bankruptcy

Can I Qualify For A Home Loan After A Bankruptcy?

The answer to the above question is yes.

  • However, there is a mandatory waiting period after a bankruptcy discharge in order to qualify for a residential mortgage loan
  • HUD, VA, USDA, Freddie Mac, and Fannie Mae have their own mortgage guidelines on waiting periods after a bankruptcy
  • There is a 2 year mandatory waiting period to qualify for an FHA, VA, USDA loans after the discharge date of Chapter 7 Bankruptcy
  • Lenders also want to see re-established credit after bankruptcy and no late payments after a bankruptcy
  • There is a 4-year mandatory waiting period to qualify for a conventional loan after Chapter 7 Bankruptcy
  • Mortgage lenders also want to see re-established credit and no late payments after the person has had a bankruptcy discharge

There is no waiting period after bankruptcy with non-qm loans. 10% to 20% down payment is required. The down payment requirement depends on borrowers credit scores. To qualify for a mortgage with a direct lender with no overlays on government and conventional loans please contact The Gustan Cho Team at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. We are available 7 days a week, evenings, weekends, and holidays.

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