Q&A: Bankruptcy

As a Real Estate professional… as Michelangelo once stated… “I am still learning” Here is a very good article from Francis Solomon I thought I should share with you. Don’t hesitate to give me a call at 340-690-9177 or shoot me an email at [email protected] if you would like more information about Real Estate from one our professionals here at RE/MAX St. Croix in Americas Secret Paradise.

How long until a bankruptcy clears up?

Q: How long after a bankruptcy would it be possible to purchase a home?

A: Bankruptcy stays on your record for 10 years. But you don’t need to wait a decade to get a loan.

You are more likely to get a loan if:

  • You can explain the reasons for your bankruptcy filing, such as unforeseen circumstances, unemployment, illness, divorce, etc.
  • A few years have passed since you declared bankruptcy.
  • You have since kept an excellent credit record.

Once bankrupt, now ready to buy
Q: I recently went bankrupt and have since been married. We have about $60,000 for a down payment and our combined yearly income is $85,000. My wife and I have little debt, and we have been employed by the same companies for more than 10 years each. We also have credit cards that are current. Are there lenders that will grant us a loan? — Mike

A: Your chances of getting a mortgage are good because you can put a significant amount–$60,000–toward the house as a down payment. (Lenders feel more confident you’ll be able to pay mortgage payments if you put down 20 percent or more toward the purchase price.)

However, your “recent” bankruptcy could still make it difficult for you to get a conventional, prime loan (sometimes called an “A” loan). And with a subprime loan, you might have to pay a few more points or higher interest rate.

Here are a few creative ways to finance a home purchase. (See the glossary for a detailed explanation.

  • Use a no-document loan.
  • Try seller financing.
  • Look into an assumable mortgage.
  • Pay in cash.