Common questions about purchasing a home after bankruptcy

Those who filed bankruptcy may have several questions about preparing to apply for a mortgage and purchase a new home.

Those who file for bankruptcy in New Jersey may experience significant changes to their life and in some cases, may lose their home. For this reason, those who file for bankruptcy may be eager to reorganize their finances and purchase a new house after the conclusion of the filing process.

How long should filers wait to buy a new home?

In most cases, those who have filed bankruptcy should wait for about two years following this action to apply for a mortgage. However, depending on the type of loan buyers apply for, they may have to wait up to four years to get approved for a new mortgage. The reason for this variance is because some lenders require bankruptcy filers to wait a pre-determined period of time before applying for a loan.

How can buyers prepare for the purchase?

The first step bankruptcy filers should take if they desire to buy a home involves reorganizing their finances and sticking to a budget. Those who filed bankruptcy should also carefully examine their finances and credit to determine where they stand and when they will feasibly be able to make a home purchase. Additionally, buyers should consider securing a credit card to rebuild their credit score and grow their savings account, so they can put down a sizeable down payment.

What should buyers do before applying for a mortgage?

After preparing financially to buy a new home, those who filed for bankruptcy should also obtain copies of their credit report from the three major reporting agencies. Then, buyers should check all of these reports for errors that could harm their credit score and potentially affect their chances of securing a new mortgage.

How can filers win over a lender?

Many lenders require buyers to submit a letter that details why they had to file for bankruptcy. In many cases, lenders want to see that the bankruptcy was caused by circumstances the buyers could not control, like a serious illness, unemployment or the death of a spouse. Buyers should also submit proof of these extenuating circumstances to prove they are worthy of a home loan.

Work with an attorney

Those who file bankruptcy in New Jersey may have concerns about how to return to life as normal and purchase a new car or even a house. Those interested in the bankruptcy process should consult with an attorney to find out more about this legal process and whether it is the right option for them.