Tips for Buying a Home after Bankruptcy
One of the biggest fears individuals face prior to filing bankruptcy is that they will never be able to qualify for credit again or even own a home. The fear of filing for bankruptcy keeps many people struggling with insurmountable debt they will never be able to pay off.
The truth is the stigma against debtors is gone and those who file for bankruptcy will be able to buy a home within 1 to 2 years after filing bankruptcy. In fact, it is possible to rebuild your credit immediately after bankruptcy. The ‘American Dream’ is alive and well after filing for bankruptcy.
Here are some tips for buying a home after bankruptcy.
Reorganize Your Finances
One of the first steps you should take after receiving your bankruptcy discharge is to request a free copy of your credit report from the three major bureaus: Experian, Equifax and TransUnion. It can relieve some of the unknown and the stress associated with where you stand after bankruptcy. In addition, make it a regular practice to check your credit report, not only for the progress you are making post-bankruptcy but to catch any errors.
Stick to a Budget
Establish a realistic budget you can stick to after filing for bankruptcy. Ensure that all household expenses are paid on time consistently, and the results will show in your credit report and the progress that is made over time will result in an increased credit score. NEVER BE LATE on a bill that reports to the credit bureaus.
Rebuilding Credit
Filing for bankruptcy allows you to press the restart button on your finances. Whether you filed for Chapter 7 bankruptcy (a simple and straightforward elimination of your unsecured debts) or a Chapter 13 bankruptcy (a structured repayment plan approved by the bankruptcy court), you can begin rebuilding your credit immediately after receiving your bankruptcy discharge. One way to begin rebuilding your credit is by using a secured credit card to pay for some of your monthly expenses. I like the one at Amalgamated Bank of Chicago. Also a shared secured loan at Fairwinds does wonders for your credit. However, for this to be successful, the credit card and installment loan must be treated just like cash, meaning the bill needs to be paid on time and in full every month.
Grow Your Savings
“Pay yourself first” is more than just a saying. It is an important mindset you must have when saving for expenses, such as the purchase of a home. It is important that you evaluate what your monthly budget allows and to see what amount can be set aside for savings. The more money you can put aside to purchase a home the better. Consider setting up a separate savings account for this money that is auto debited each month. Set an objective and work towards that goal.
Organize All Financial Documents
When it comes to purchasing a home, it is important to have all of your financial documents organized. The potential buyer needs to make sure that he or she has all of the required documentation ready to go. This includes paystubs, tax returns, all bank and credit card account statements, insurance documents, medical bills and all legal documents, including the bankruptcy petition, marriage or divorce records.
Put a Plan in Place
The idea of owning a home can be exciting, but it is important that the individual be realistic about what he or she can afford. Be sure to consider all of the unexpected costs that go along with owning a home. Many online calculators exist to allow potential home buyers to calculate what they can afford.
Shop Around
Buying a home is a big decision, as is deciding on which mortgage to take. Shop around for the best option and do not settle on the first offer. Research what types of mortgages are available, whether they are through private lenders, commercial banks or credit unions. Government loans, such as the Federal Housing Administration (FHA) loans may also be available. Look into what interest rate options are available, including fixed-rate loans and adjustable-rate mortgages. In addition, be sure to calculate and account for fees that go along with purchasing a home, such as home inspections, appraisals, title processing and additional closing costs.
At The Benenati Law Firm, we have helped thousands of individuals and families eliminate their debt and get a fresh start financially. If you have any questions on this topic or are struggling with overwhelming debt, call Orlando bankruptcy attorney, Walter Benenati at 407-777-7777. Ask Walter how you can restart your life. The day you hire our firm, we will contact your creditors to stop the harassment and collection calls. We make our hours convenient for our clients and offer free consultations on Saturdays (9:00 a.m. – 3:00 p.m.) and throughout the week until 5:00 p.m. If you are in a financial crisis and considering filing for bankruptcy, contact an experienced Orlando bankruptcy attorney who can advise you of all of your options.