Mortgages After Bankruptcy: Here’s What You Need to Know
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If you’ve recently filed for bankruptcy, you’re probably thinking you won’t be able to apply for a mortgage for years to come. However, this isn’t always the case. If you’re thinking about moving into a new home and getting a new mortgage, here are some tips to keep in mind before applying.
Get Your Life in Order
Before you even consider taking out any sort of loan, it’s essential that you get your life in order. This means organising your bills, developing a budget and making sure that you don’t fall into the bankruptcy trap again.
While you may not be able to get a mortgage right away after filing, consider applying for a credit card that is designed for those with bad credit to help rebuild your credit. When you do get one, try to use it and pay it off on time, never missing a payment. The goal here is to rebuild your credit as soon as possible and get your finances in order. By doing so, you can feel comfortable making that larger mortgage payment.
The UK’s OFT has a home budget planner available for free that might be worth checking out. [PDF]
Since every financial situation is going to be different, consider talking to a mortgage broker who is experienced with bankruptcies. This no-cost, no-obligation meeting will give you an idea on where you stand and if you can even afford the mortgage now. Banks like Clydesdale Bank will generally be able to give you at least some advice on what is available and what steps you need to take to improve your application.
If you’re not able to afford it today, these professionals will be able to offer you guidance on what it may take to afford the mortgage in the future. In the world of banking, you have to remember that you’re going to receive a lot of “no’s” after your bankruptcy, so don’t let that discourage you. Be sure to keep talking until you find someone who may consider your circumstances.
If you’re able to find a bank that is willing to lend to you, don’t accept the offer just yet. Be sure to research the following fees:
- Broker fees
- Interest rates
- Type of mortgage
- Tie in period
Many banks know that applicants with bad credit may be desperate, and because of this, they may tack on higher or unnecessary fees. The lesson here: Don’t let the banks take advantage of you.
Before you Apply
When you think it’s time to apply for a mortgage, always make sure that you get a credit report from either Experian or Equifax. While your credit score may still be low while checking it, you’re going to want to look for any inaccuracies that may cause that number to be even lower.
If you do spot any inaccurate information, it’s important you resolve this problem as soon as possible. Inaccurate information may cause a lender to decline your mortgage application.
In the end, it is possible to get a mortgage after a bankruptcy. As long as you don’t give up, work on rebuilding your credit score and save for a substantial down payment, you should be able to find a bank that’s more than willing to work with you.