The biggest question in every bankruptcy filer’s mind is the access to credit and especially mortgage loans after bankruptcy. This can be a tricky question and has different answers based on circumstances. The whole reason why filing bankruptcy makes the lenders more worrisome and nervous is due to the historic inability to repay the debt. That is more evident with lenders lending money to bankruptcy filers who have filed Chapter 7. Circumstances change, but borrowers who have availed a huge discharge through Chapter 7 are bound to have no assets and inconsistent income. Learn more about Chapter 7 bankruptcy filing consequences by logging on to https://www.recoverylawgroup.com/bankruptcy/.
How to avail yourself of a major credit like a mortgage loan after bankruptcy?
It is extremely difficult to avail of a big-ticket credit or loan immediately after bankruptcy. Different lenders assess risk differently and there can be a possibility of credit, but it will have other downsides to it as well. For instance, some institutions or individuals might understand that there is no discharge even after filing for bankruptcy during the seasoning period which usually lasts around 5-7 years. This can be a no-risk lending opportunity for many lenders. The interest rate for such loans availed are extremely high and they require lump-sum payments periodically as well.
Overall, to sum up, there is a possibility to get credit in the unorganized credit market, but the terms and costs will be extremely unfavorable. This is certainly not recommended for a filer trying to recover from poor financial decisions previously. The other option is to be patient and steadily build a credit score and then avail credit from recognized financial institutions at a favorable rate. It is important to not get desperate and avail credit on favorable terms as high interest and awful terms can further drown you in financial trauma, the situation you came out of by filing for bankruptcy just recently.
Some of the popular lending programs that might help
It is always good to avail of credit using structured programs or lending agencies. There are chances of them being pre-approved and the chance of rejection or unfavorable terms is less. Some of the programs that can be used to avail of a favorable housing loan can be listed as follows-
- Federal Housing Administration program
As the name suggests, the federal government offers a favorable loan program for the poor to avail of basic housing needs. This program is facilitated by recognized financial institutions on behalf of the federal government. The requirements to be eligible might be illustrious and lengthy but there are more chances to avail of credit once qualified under the FHA program. Also, one must wait about 2-3 years after the chapter 7 bankruptcy court ruling before availing of credit under the FHA scheme.
- Veterans Administration program
This is also an FHA similar program but with more formalities. If you are easily eligible for the FHA program, chances are you might be eligible for the Veterans Administration program as well. If you are struggling to qualify for the FHA program, Veterans can be a far-off thing. There are other programs that are insured or sponsored by the government and are offered by various recognized and authorized financial institutions. It is essential to wait at least 3 years before trying to apply for these schemes.
Chapter 13 filer’s consequences
The situation in Chapter 13 is a little different. Until the restructured payment plan which usually lasts for 3-5 years is completed, the borrower remains under the supervision of the bankruptcy court. To avail of new credit or to make any modification in the payment plan by adding more credit must go through the bankruptcy court. There could be a requirement of completing at least one year of repayment as per the directions of the bankruptcy court.
The lenders closely monitor the financial behavior of the borrowers after the filing of bankruptcy. It is important to remain current on all expenses, bills, dues, etc., to ensure a positive impact on credit score as well as higher chances of getting bigger credit soon. If you need counseling on improving your credit score or help with FHA or VA, or address some of your bankruptcy concerns, 888-297-6203 is your number to connect with top attorneys in Los Angeles & Dallas, TX.