Monday, November 16, 2015

Applying for a Mortgage After Bankruptcy: 5 Steps

Declaring bankruptcy can be devastating and put a damper on your plans of purchasing a home at the Lake of the Ozarks. However, with some time and money, it is possible to apply for a mortgage after bankruptcy. With proper preparation, patience and financial planning, you might be able to purchase a home sooner than you think. While a personal bankruptcy will stand out on your credit report for as long as 10 years, the barrier it creates in obtaining a mortgage doesn't have to last that long. Follow these steps for applying for a mortgage after you've declared bankruptcy:

1. Be Patient. 


First of all, you will have to wait until your bankruptcy is discharged before you can do anything in regards to applying for a mortgage. The mandatory waiting periods to apply for a mortgage backed by Fannie Mae or the Federal Housing Administration last from two to four years. Within that period though, you need to work on getting a few things in order. Immediately after your bankruptcy case is discharged, you need to stop and take a look at where you are financially. Know exactly how much income you have and what your necessary living expenses are. You have to have a tight lease on your discretionary income in order to move forward in purchasing a home. In addition, make sure you pay every one of your bills on time, every time. Now is also the time to scrutinize your credit report. If there are debts that have been paid back, but still appear on your credit report, contact the credit agency to have them removed. 

2. Save Money. 


Once you have a budget established and that budget is under control, you need to start saving money. You need to build up an emergency fund, as well as establish enough money for a down payment and other upfront expenses that come with buying a home. While down payment requirements have significantly decreased, it's best to have about 20% of the cost of the home saved for a down payment. Not only will that 20% down payment reduce your total loan amount and the monthly payment amount, but it will show the lender that you're invested in the home and assures that you won't walk away from it if/when hard times come again. By saving your excess money each month, you'll get in the habit of being able to make your mortgage payments or covering those unexpected expenses of home ownership.    

3. Make a Plan. 


Owning your own home is not cheap. As a homeowner, you'll be responsible for fixing everything. Home maintenance is a big expense for every homeowner. When making your plan, keep in mind that there is more to owning a home than just sending in a mortgage payment every month. Besides electricity, water and sewer, you'll have to pay property taxes and insurance. Consider the cost of services such as landscaping, snow removal, and pest control. Then don't forget about the unexpected services such as a plumber or HVAC repairman. Make sure you have a long term plan for how you are going to afford your own home. There's a lot to think about when deciding to buy a home.

4. Prepare Your Documents. 


Now is the time to start getting your financial documents organized. While applying for a mortgage is not quite as detailed as filing for bankruptcy, similar records are required for most applications. Being organized shows that you're paying attention to detail and doing everything you can to get everything back on track after the unfortunate circumstances. Find out in advance what documents your Lake of the Ozarks mortgage lender requires and have them ready for your meeting. There's nothing worse than having your loan delayed because of a missing document, after you've already waited so long to get to this point.

5. Applying for a Mortgage. 


When you actually do apply for your mortgage, the process will be the same as if you hadn't filed bankruptcy. The only real difference is that your financial situation may not look the best. If you're coming off a recent bankruptcy, be prepared for slightly higher interest rates than those offered to others. More important than interest rate though, you need to be aware of the upfront charges you will be required to either pay or have rolled into your loan amount. If you properly prepared during the previous steps, you should know how much you can afford and will be able to make the best decision.

Going through bankruptcy is not ideal, but it doesn't mean you can't pick yourself back up and move forward. As your mortgage lender at the Lake of the Ozarks, I am here to help you through the process of applying for a home loan. I will work with you every step of the way, offering the first class service you deserve. Contact me today at 573-746-7211 for more information about Lake of the Ozarks home loans.

For Lake area news, resources and tips on financial services, please 


Michael Lasson
Sr. Residential Mortgage Lender
NMLS #: 493712

2265 Bagnell Dam Blvd, Suite B
PO Box 1449
Lake Ozark, MO 65049

Direct:  (573) 746-7211

Email:  mlasson@fsbfinancial.com

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.

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