Those that recently filed for bankruptcy often wonder if they are going to eventually be approved in the event they need a home loan. Also, it is possible that you think about whether or not you should actually buy the home after the recent bankruptcy. Talking to an experienced chapter 13 bankrupcty lawyer is what will answer the question for you but the basic facts you have to remember are presented below.
The truth is that after bankruptcy it will be quite difficult to be approved for a loan, especially when a mortgage is involved. However, this does not mean it is impossible. Right now you have access to numerous really interesting bad credit loan programs you can take advantage of. There are different subprime lenders that focus on helping those that have really poor credit and that want to become home owners. In most cases this is due to the fact that bankruptcies are more numerous than ever. Those that have bad credit deserve home financing options.
After the bankruptcy it is actually a good idea to buy a home. This is due to various different reasons but the important ones are:
Increasing Credit Score
If you take a loan out to get a home you will quickly improve credit rating. This is important since your credit score will be lower after the bankruptcy. After you go through the pre-payment penalty time frame, it is possible to refinance a bankruptcy you might have for an interest rate that is much lower. Following the bankruptcy discharge period of around 3 years, it is quite easy to get the low interest rates that many mortgage loans have.
Building Home Equity
When you simply pay your rent, cash is being thrown away. We say this because of the fact that you do not gain anything in the process. If you are the owner of a home, the value of the property keeps increasing. You practically work towards asset ownership. In the future, you will be able to take advantage of the equity of a home for extra loans or in order to refinance the mortgage.
Equity Loans
After the home was bought and six months passed, it is possible to take out home equity loans. At the same time, you are allowed to consolidate various debts you might have after the bankruptcy. This includes debt that was not initially included in the bankruptcy. Just remember the fact that you cannot remove student loans and taxes when you go through the bankruptcy process. All the extra cash that you receive through the equity loan can be invested in home improvements or in a new business.
Final Thoughts
To sum up, buying a home after you went through a bankruptcy is not at all a bad idea. In fact, it is a really good idea. You can end up becoming stronger from a financial point of view and, most likely, the biggest advantage is the fact that this allows you to build up your credit rating.
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