5 Tips For Financing A House in Colorado Springs After a Bankruptcy

5 Tips For Financing A House in Colorado Springs After a Bankruptcy

Although it may seem like it, bankruptcy is not the end of the world when it comes to financing a house. Still, although bankruptcy reduces or eliminates your debts, it does damage your credit . . . for a while. But it is possible to buy a house after bankruptcy if you take the necessary steps. So here are 5 tips for financing a house in Colorado Springs after a bankruptcy.

1. Wait the Required Amount of Time

The first question most people have when considering financing a house in Colorado Springs after bankruptcy is “When can I apply for  a mortgage?” The answer to that question depends on several things, but the main ones are the kind of bankruptcy and whether the bankruptcy has been discharged.

The waiting period after a bankruptcy, only after which a lender will consider you, is determined by the kind of bankruptcy and the kind of mortgage. So you have to wait the required amount of time “because lenders will base their decision on your financial behavior in the time period following your bankruptcy.”

Here, according to financial pros, are some typical wait times:

CONVENTIONAL LOANS

“These have the longest waiting period. You will need to wait two years following a Chapter 13 bankruptcy, and four years following a Chapter7 bankruptcy.”

FHA AND VA LOANS

“You will need to wait one year after a Chapter 13 bankruptcy, and two years following a Chapter 7 bankruptcy.”

USDA LOANS

“You will need to wait one year after a Chapter 13 bankruptcy, and three years following a Chapter 7 discharge.”

2. Make Sure Your Bankruptcy is Discharged

One highly important thing you’ll need to do for financing a house in Colorado Springs after a bankruptcy is to make sure the bankruptcy has been discharged. “To even be considered for a mortgage loan request, the bankruptcy must first be discharged. A bankruptcy discharge is an order from a bankruptcy court that releases you (the debtor) from any liability on certain debts and prohibits creditors from attempting to collect on your discharged debts.”

What this boils down to (and what lenders want to make sure of) is that you aren’t obligated to pay “the discharged debts” and that creditors can’t force you to pay them. This discharge isn’t necessarily the end of the bankruptcy case, but it is a vital step where lenders are concerned. Often, though, courts close bankruptcy cases soon after discharge.

3. Check Your Credit Report

As always, and perhaps especially for financing a house in Colorado Springs after a bankruptcy, lenders will want to carefully peruse your credit report. Lenders, understandably, will want to make sure of your creditworthiness. And keep in mind that while bankruptcy proceedings can stay on your credit report for up to 10 years, that doesn’t mean you have to wait 10 years to apply for a mortgage.

So, to expedite things, you need to review your credit report to make sure it is up to date and accurate. Experts advise looking for the following kinds of errors and inaccuracies:

  • Already paid or discharged debts
  • Other people’s information resulting from similarities
  • “Incorrect information due to identity theft”
  • “Information from a former spouse’
  • “Outdated information”
  • “Accounts not included in your bankruptcy filing listed as part of it”

4. Begin Rebuilding Your Credit

Financing house in Colorado Springs after bankruptcy also demands that you begin rebuilding your credit as soon as possible. And although getting credit in order to rebuild your credit after a bankruptcy can be difficult, there are a couple of things you can do.

“If you want to qualify for a mortgage . . . you’ll have to prove to lenders that you can be trusted to repay your debts. After a bankruptcy, your credit options may be fairly limited, but two ways you can start rebuilding your credit are secured credit cards and installment loans.” Just make sure to make all payments on time all the time.

5. Consider an FHA Mortgage

In order to finance a house in Colorado Springs after a bankruptcy, you may also need to consider other mortgage loan options. There are several good reasons why you should consider an FHA mortgage.

Industry pros explain: “The FHA understands that the recent economic downfall has created hardships for many Americans, and is therefore rather forgiving of bankruptcies in your credit history. If you can qualify for an FHA loan, this may be your best method of securing affordable home financing in a timely manner.

The main thing to keep in mind is that financing a house in Colorado Springs after a bankruptcy is in fact possible – a lot of people have done it. You just have to take the necessary steps and prove to lenders that you’re a good risk. There are in fact many more things you can do than we’ve listed here. Contact your local real estate agent to discover more.

To find out how our qualified agents can help with financing a house in Colorado Springs, just give us a call at 719.642.0220 or send us a message.

Sarah

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