The New York Times had an interesting article last fall letting readers know how to obtain a mortgage if they have filed for bankruptcy or gone through foreclosure.
According to the Times article, a bankruptcy filing typically stays on credit reports for 7 to 10 years. However, if you work hard on improving your credit, you could become eligible for a mortgage within a year.
“Mortgages guaranteed by the Federal Housing Administration are permitted one year after a consumer exits a Chapter 13 bankruptcy reorganization, which requires a repayment plan that is often a fraction of what is owed, and two years after the more common Chapter 7 liquidation,” the article said.
The article also said that guidelines used by large mortgage lenders like Fannie Mae or Freddie Mac call for a two-to-four year waiting period following a bankruptcy before a person can become eligible for a home loan.
“There are a lot of other things that go into your ability to get approved for a mortgage after a bankruptcy,” said John Walsh, the president of Total Mortgage to the Times.
The article advised people not live a “cash only” lifestyle after bankruptcy and foreclosure, saying they should open a secured credit card and re-establish their credit by paying bills on time.
We always recommendto our clients that they reestablish their credit after bankruptcy. After a debtor exits bankruptcy, their income to debt ratios improves because their debts are paid off or discharged. If you can pay your bills on time, you can gradually rebuild your credit following a bankruptcy.
If you have questions about the bankruptcy process and how it could affect your credit, contact our Washington DC and Maryland bankruptcy lawyer now for a free consultation.
Law Firm of Kevin D. Judd– Maryland and Washington DC bankruptcy attorney