Common questions about purchasing a home in New Jersey after bankruptcy

After filing for bankruptcy, filers may have many questions about rebuilding their finances and purchasing a home.

Those who file for Chapter 7 or Chapter 13 bankruptcy may be eager to return to life as normal and purchase a new home. While this may be the goal of many bankruptcy filers in New Jersey, buyers should remember that this process can take time, especially if their home was foreclosed on as part of the bankruptcy process.

How can filers reestablish credit?

After filing bankruptcy, lenders want to see that mortgage applicants have zero delinquencies on their application. Potential home buyers should be careful about how they use credit after bankruptcy and only open a few new credit lines on a staggered basis. By doing this and making payments on time, buyers can get their credit back up to a good level.

How long should filers wait to apply for a mortgage?

After declaring personal bankruptcy, filers should plan on waiting approximately two years before they apply for a mortgage and try to purchase a home. However, buyers should remember that lenders often have different time limits, and some buyers may have to wait up to four years before trying to purchase a home. Generally speaking, the longer filers wait to apply for a mortgage after bankruptcy, the more likely it is that lenders will view their application favorably.

What should filers do to prepare to apply for a mortgage?

Before going in and speaking with a lender, potential home buyers should obtain copies of their credit report from the three main reporting agencies. Then, buyers should go over these reports in detail and dispute any errors on them that could affect their credit.

Bankruptcy filers should remember that in some cases, reporting errors can remain on their credit reports even after the bankruptcy filing process is over. These problems, while they may seem minor, can drag down filers' application and potentially prevent them from securing a mortgage.

How can bankruptcy filers enhance their chances of getting a mortgage?

Buyers should be prepared to present their lender with a formal letter detailing why they needed to file bankruptcy, whether due to a serious illness, loss of employment or other circumstances. Lenders will also want to see proof of these difficult circumstances connected to the letter. For example, severance paperwork, a death certificate or medical bills can all serve as appropriate evidence.

After filing for bankruptcy, filers in New Jersey may have many other questions about their ability to purchase a home. In this situation, buyers should contact an attorney in their area about their options and how filing bankruptcy could affect their circumstances.