fbpx
Average Rates: 3.6% - 30yr|3.25% - 15yr
for a free quote!

Homestead Financial Mortgage

Let Homestead Financial Mortgage provide you with a stress-free home mortgage or refinance experience! Ask us anything at anytime because it's always #zerotofindout.

5 Tips to Qualify for a Mortgage After Bankruptcy

5 Tips to Qualify for a Mortgage After Bankruptcy

Young Couple and BankrupstcyAfter the Great Recession, many have been trying to pick up the pieces and move on with their lives, or just get back to where they were. Today we’ll talk about how to qualify for a mortgage after bankruptcy. How to manage your credit afterward, how to manage your finances, and when you can expect to be able to qualify for a mortgage.

Qualifying for a mortgage after bankruptcy isn’t a forever wait. In fact, you can qualify for a mortgage as soon as 2 years after a bankruptcy.

If you’re one of the unfortunate many who have filed for bankruptcy(bk), the road back to credit health starts with which type of bankruptcy you filed. A Chapter 13 bk is easier to work with in that the payback plans helps re-establish credit history, but the 3-5 year payback plan takes your timeline out longer. A chapter 7 is over faster, but it can be more problematic especially if the borrower didn’t reaffirm on any trade lines(or keep any accounts open) after their filing

What do I need to do?Bankruptcy - Recovery

  1. Re-Establish credit. Get your credit score above 640
  2. Do not miss any payments
  3. Pay your rent and other bills by check
  4. Check your score before your 2 year window opens.
  5. Clean up any outstanding inaccuracies

Re-Establish Credit

This can be easier said than done. Getting a secured credit card will help. A secured credit card is when you put a deposit down on a credit card to secure the amount of your credit limit. Capital One has a secured credit card program. Other department stores have on the spot approvals with low credit score requirements that can get you started. Their interest rates may be higher, but so long as you pay off your balance at month end, you should be safe. The goal is to have 3 trade lines, plus the payments for where you live reporting for at least 12 months before you apply.

 

Get your score above 640

FHA will approve most borrowers 2 years after a BK, but participating banks have established a market where the minimum credit score to qualify is 640.

Do not miss any payments

In order to qualify for a mortgage 2 years and 1 day after your BK, you must have re-established credit and can not have missed any payments since the discharge. So, from the time of your discharge, you must be squeaky clean!

Pay your rent and other bills by check

Do you best to pay any monthly obligations by check and not by cash. For borrower’s who are borderline, being able to produce cancelled checks to show payment history can be the deciding factor for approval or denial of your mortgage application. If you’ve always paid by cash, there is no objective proof the payments were actually made.

Check your credit score before your 2 year window opens.

If you want to qualify for a mortgage as soon as you can after a bankruptcy, then the time to pull your credit is not at 2 years. You should pull your credit 6 months after your bankruptcy to make sure all of the trade lines that were discharged in BK report that way and not as collections and any new trade lines you have re-established are now reporting correctly in your favor.

Clean up any outstanding inaccuracies

In many cases after a BK, accounts that were supposed to be reporting as discharged, don’t report correctly, many times they report as collections or write offs. If you pull your credit early enough, you have plenty of time to correct them. The longer you wait to correct in-accuracies, the harder it is due to lack of documentation and support for the new action.

To conclude, it is possible to qualify for a mortgage as soon as 2 years after a bankruptcy will a good amount of discipline, planning and effort.

Take a look at when you can get a mortgage again after bankruptcy,

Buying a Home After Foreclosure

If you’ve experienced foreclosure you might think you’ll never be in a position to buy another home again. Foreclosure certainly impacts your credit score but it’s only a matter of time before you can once again apply for a mortgage. The question many people have is how long they have to wait before buying a home after foreclosure. How long depends on the circumstances of your foreclosure, your ability to increase your credit score, the type of loan you’re prepared to apply for and the foreclosure waiting period. Continue reading “Buying a Home After Foreclosure”

Climbing Out of Debt – Part 1

Like many Americans, you have a few credit cards and do your best to manage your money responsibly but it seems every month you come up a few hundred dollars short. Trouble is your annual raise hasn’t kept pace with the rising costs of gas, groceries and other necessities let alone discretionary or luxury items like movie tickets, your fitness club membership or trips to the spa. You know if you don’t rein in your spending, you’re debt will grow and climbing your way out of debt will be even more difficult than it is right now. Nobody wants, or likes, to be in debt especially in today’s tough economy. While climbing your way out of debt may seem like achieving the impossible, there are several ways to do it. Continue reading “Climbing Out of Debt – Part 1”

When is a HELOC Right for You?

Of all of the mortgage products on the market, today we’ll talk about a Home Equity Line of Credit or HELOC – what is, how it works, benefits vs. drawbacks and if it would be right for you.

What is a HELOC?

A HELOC is a revolving line of credit that your home secures. Think of it a cross between a credit card and mortgage, only with a lower interest rate because your home secures the underlying debt. An additional benefit is since the debt is secured by your home, the interest is tax deductible. Continue reading “When is a HELOC Right for You?”

Good Credit to Great Credit

Many people ask when looking into refinancing their mortgage ask why their credit is considered good, but not excellent. It is a common misconception that simply because you pay your bills on time every month that your credit is viewed as excellent.

There are other important factors involved in credit score ratings derived by credit reporting agencies. For instance, the 3 credit bureau agencies, Trans Union, Equifax and Experian look at how many credit cards you currently have open, how long they have been open, and how much is currently owed with each creditor associated with the credit limit available. These factors can make a big difference when looking to get a refinance approved and the program qualified for. A consolidation home loan refinance is a productive way to pay off credit card debt in full.

Also, it often increases credit scores from good to excellent in a quick time period, since credit cards that were once listed as owed with high balances are reported as paid in full through the debt consolidation refinance program.

Repairing Your Credit Score: Other Options

If you’re interested in learning more about repairing and maintaining a good credit score, particularly if you need to improve your own credit score, then read on. Perhaps, as a potential first-time homeowner, you’re in the market for a mortgage—or maybe you need your mortgage refinanced; either way, good credit is important!

Fixing and repairing your credit score is more than simply paying off debt regularly and in a timely manner, however. Yet it seems to be commonplace for consumers to be ignorant of what affects their credit score and what they can do to repair it and maintain a higher score.

But as already mentioned, there’s a lot more involved with what goes into a credit score. Here are five other, perhaps lesser-known ways you can fix and then improve your credit score. Continue reading “Repairing Your Credit Score: Other Options”

Buying Your First Home with Bad Credit

Lenders are a lot more cautious these days making buying your first home with bad credit seem like mission impossible. Trouble is circumstances have changed in the past few years with new loan limitations making it harder for people to get loan approval. While there are things you can do to maximize your chances of getting a loan, you should ask yourself some tough questions before investigating loan options.

First, consider if buying a home is good for your financial situation. Owning a home can be a lot of pressure with costs like homeowners insurance, repairs and property taxes many first time homebuyers have not had to pay before. Buying a home is one of the biggest lifetime investments many people will make. So you’ll have to do some soul searching to determine if owning a home is right for you.
Continue reading “Buying Your First Home with Bad Credit”

Avoiding Bad Credit

Let’s face it, bad credit happens to all of us at one time or another. Whether you’re unemployed, are disabled, sick and cannot work or the victim of credit card fraud or identity theft, falling victim to bad credit is easy. Here are some ways to avoid bad credit.

One of the best ways to avoid bad credit is to prevent it from happening in the first place. Creating a monthly budget before you start developing credit is the ideal way to keep your credit from getting out of hand. By making a list of your monthly income and monthly expenses, you’ll know your spending limitations. Just because a credit card allows you to go out and buy a bunch of stuff right away doesn’t mean that you should. It’s important to put a cap on your spending and stay well below your credit card limit. When you spend close to your credit card’s limit, your credit score goes down. Continue reading “Avoiding Bad Credit”

5 Tips to Improve your Credit, to Qualify for a Mortgage

 

Of the potential borrowers that apply through either of our St. Louis or Kansas City mortgage offices that get turned down, the major reason is due to credit score (minimum required is 640) and the other is due to value.

While there is nothing we can do in the near term about value (from the housing crisis), here are some tips to improve your credit score that can help you in the next 30-180 days.

1. Pay your bills on time. Do not pay them late. Call this the sarcastic “OMG” part of our blog, but this makes up 35% of your credit score. It is important to note, that paying your bills late, also means:

  • Paying late, but paying the late fee. You are still marked as paying late.
  • No longer paying your car loan because you “gave it back” is still paying your bills late. “That’s not a repossession, we gave it back”, is not a viable argument.
  • Allowing a debt to go to collection because you “disagreed” with the charge is still marked as paying late. You need to pay the debt to avoid the late mark then get your money back from the creditor.

2. Keep the Balances on Revolving Accounts Low.

For example, if you have a credit card with a $10,000 limit, and:

  • You owe $10,000, that is bad. This means you are maxed out.
  • You owe $100, that is Good! This means you have financial room.
  • You haven’t used that credit card for a while, don’t close it out. The capacity to have access to credit helps your score.

3. Adding a Spouse as an Authorized User:  This works for the situation where one spouse has a higher, qualifying score, but the other does not, but both borrowers income is needed to qualify for the loan.

If your spouse has available credit on their credit cards when you have little credit or little available, then ask to be added as an authorized user. This will help both borrower’s score if you need a few more points.

4. Adding a Secured Credit Card: I’ve mentioned before that credit card utilization accounts for 30% of your score, so if you’re having trouble getting a credit card, then apply for a secured credit card. We’ve had success referring borrowers to Orchard Bank, www.orchardbank.com.

5. Use Department Store Credit Cards as a Last Resort: While they can help, department store credit cards usually keep a low credit limit, consequently, are easy to max out, and can’t be used at a wide variety of stores.

By using a couple of these tips, hopefully that may result in an increase in score just enough to qualify or keep the rate you qualify for as low as possible.