One of the biggest parts of the so-called “American Dream” is purchasing your own home. However, if you have filed for bankruptcy, this may be a dream deferred. As discussed in other blog posts, re-building your credit takes time and effort on your part but it is not an unreachable goal. This same concept applies towards big-ticket purchases, such as real property, post bankruptcy discharge.
In order to be able to qualify for a mortgage loan, one thing you must do is show that you are in good standing with other credit payments. After your bankruptcy has been discharged, it is important to not over-extend your credit and make timely payments with the new accounts you have opened. It is also important to save money for such expenses as a down payment and closings costs. A down payment can vary from person to person but closing costs are usually around 2.5% of the purchase amount of the property. Remember that the more you are able to provide as a down payment, the less you are borrowing against the property, which will help in the financing process.
It is recommended to wait at least 2 years after filing for bankruptcy to begin the process of purchasing a home. Depending on the type of loan you will be applying for, whether it is a Conventional Loan, FHA Loan, or VA Loan (to name a few), the amount of time recommended might vary. Use this time to research the types of loans you would like to apply for and schedule meetings with banks to see which financial institutions you would want to finance your home with once you are ready to do so. By preparing ahead of time for this process, you will be ahead of the curve and have a clear idea of how you want to proceed. This purchase and these decisions will be affecting you for the better part of the next 30 years so it is not a decision to ever take lightly.
Besides rebuilding your credit, it is also important to show consistency in other parts of your financial life. It is a very good idea to maintain a steady job after filing for bankruptcy to show your future lenders that your income should remain consistent after you purchase your home. Lenders will be focusing on your debt to income ratio, among other things, so a steady job will be a very good indicator of where you stand financially for this purchase.
Buying a home is one of the most exciting things you can do and a bankruptcy filing shouldn’t prohibit you from being able to experience these same joys as those who have never filed before. For more information on filing for bankruptcy in South Florida, please contact our offices at 305-820-0334 to schedule a free consultation at one of our offices located in Miami-Dade or Broward County.