Buying a Home After Bankruptcy

Tips when buying a home after bankruptcy discharge

The benefits of home ownership are attractive to almost everyone. Your monthly payments begin reducing the purchase price immediately. Interest is deductible, and the potential for value appreciation remains substantial. For most people, home appreciation over 10 years or more represents the single greatest asset they will acquire during their lifetime. For most people, retirement is funded largely by the profit received when selling their home. Overall, through legislative fiat and the promotion of stability in the workforce, home ownership drives a healthy national economy. Predictably, buying a home after bankruptcy is not as difficult as most creditors would lead you to believe.

Options to consider after discharge

Because of the substantial amounts principal involved, most mortgage companies look primarily to real estate value as securityin all circumstances. Certainly, past credit ratings play a role in determining interest rates, yet to a much smaller extent than for unsecured and typical consumer credit transactions. The stability, value, and potential for real estate appreciation all negate bankruptcy filing to a certain degree. You should verify these policies first by inquiring about low documentation mortgages (a.k.a. "lo-doc" loans). When paying 30% down, only a very limited inquiry is made and the rules for approval allow almost anyone to qualify regardless of past filings. Paying 20% down saves not only the premium for mortgage insurance, also invokes a similar lenient approval policy. When paying 10% down after filing, approval is somewhat more difficult and may require an above market rate, yet qualification is based primarily in real estate value and a stable earning history.