How Bankruptcy Impacts Your Ability To Buy a Home

Many people facing overwhelming debt and creditor harassment seek a debt relief option that can offer a fresh start. Undergoing the bankruptcy process can provide debt relief, but it will negatively affect your credit report and credit score. This can affect your ability to get future credit approval for new credit cards, personal loans, or a mortgage. Fortunately, you can rebuild your credit score over time, and improve your chances of loan preapproval.

Get your finances organized.

The first step toward making a real estate transaction is to get a clear view of your debts once your bankruptcy case is closed. Get a copy of your credit report both before and after the filing process and use it to compare the state of your finances. Get into the habit of reviewing your credit history to monitor any mistakes or issues and keep track of your financial progress.

Being able to stick with a budget will help you build financial discipline and help you determine if you can handle the responsibility of a home loan. A mortgage calculator can help determine how much of a monthly payment you can afford. You will need to get preapproval for a mortgage loan so you know what type of house you can afford to buy.

There is more than one type of loan product you can seek to purchase a home. Fixed-rate home loans feature a fixed interest rate for a set period of time. Your repayment amount will remain the same as will your monthly interest payments. A variable rate mortgage comes with an adjustable interest rate, meaning it will change with the market. You may have a higher monthly payment or a lower monthly payment with an adjustable-rate mortgage.

At you can learn the difference between fixed home loan rates and variable rate mortgages and discover the best loan type for your needs.

Focus on rebuilding your credit.

Rebuilding your credit

Lenders will need to see proof that you are capable of repaying your debts before you can hope to get a home loan approval. After organizing your finances, the next step is to start rebuilding your credit. A secured credit card is backed by a savings account that serves as collateral for your credit line. Both your credit history and the amount you deposit into the account will determine your credit limit. The lender will draw from the savings account and lower your credit limit in the event you fall behind on monthly payments.

The best way to handle overwhelming debt is to seek legal advice from a law firm that specializes in bankruptcy law. Nick Thompson Bankruptcy Foreclosure Attorney has years of experience helping clients get financial peace of mind through bankruptcy relief. When you search ‘bankruptcy attorney Louisville‘, you’ll find a law firm that prioritizes building a strong attorney-client relationship starting with your free initial consultation. The expert lawyers at this law firm will guide you through the legal process, help you get a hold of your financial situation, and help you achieve the fresh start you need.

Start saving for a down payment.

start saving

You’ll need to build up your savings if you hope to become a homeowner. Get into the habit of allocating money from each paycheck into your savings account. It’s typical to put down 20 percent toward the purchase of a new home, which can save you money on mortgage insurance and your monthly repayment amount.

Bankruptcy could be your best option for solving your financial problems, but it will remain on your credit for up to ten years. Waiting at least two years after debt relief can help you get better loan terms and a better interest rate.