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Obtaining a Home Mortgage After Bankruptcy

Last week, there was a piece in the New York Time's real estate section about "Life After Bankruptcy." The piece offered valuable information about bankruptcy and mortgages to people considering whether to file bankruptcy.

For example, the article discussed how it does not take many years for someone who filed bankruptcy to obtain a home mortgage or refinance a home loan. In fact, it may take no longer than one year if the person is financially responsible after the bankruptcy.

The Federal Housing Administration allows consumers who complete a Chapter 13 reorganization plan to apply for a home mortgage after only one year. The period is slightly longer for a Chapter 7 bankruptcy: two years.

In limited situations, this amount of time can be further reduced if your bankruptcy was caused by a sudden event, such as divorce or medical bills from an illness. In order to obtain an exception, you must thoroughly document the cause of the bankruptcy for the lenders.

Like any other loan, whether you qualify for a mortgage will depend on more factors than your bankruptcy. Ways you can help ensure better credit after bankruptcy include:

  • Paying rent and utilities on time
  • Obtaining a secured credit card
  • Using your credit cards routinely and paying them back in full each pay period, ideally before the due date

Note: Bankruptcy can help turn your credit around

This is one thing that bankruptcy lawyers in Texas and around the country have been trying to stress to those struggling from overwhelming debt: bankruptcy does not mean the end to your credit-worthiness. It may instead signal the beginning of a financially secure future where credit cards, mortgages and other loans can become easier to obtain than they were before bankruptcy.

Source: The New York Times, "Life After Bankruptcy," Vickie Elmer, Sept. 13, 2012.

Learn more about bankruptcy by visiting our web pages on Texas bankruptcy.

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