Buying A House After Bankruptcy - Things To Consider
Bankruptcy can make getting any kind of financing much more
difficult. However, it's not impossible anymore to get
financing, even a few days after the discharge of a bankruptcy.
But, is getting a loan soon after a bankruptcy a smart thing to
do?
It can be tempting to buy a new home, new car, etc., after a
bankruptcy discharge you have no debt left. You will probably
feel like you can afford a larger house payment. Here are some
factors to consider before committing yourself to a new house
payment.
Pre-Payment Penalty - Almost every subprime loan (bad credit
loan) now comes with a pre-payment penalty. This penalty is
usually about 6 months worth of house payments. The pre-payment
penalty period usually lasts 2-3 years. That means, if you want
to refinance or sell your house in that period of time, that
will make it very difficult, if not impossible to sell or
refinance. That means that you are locked in. Once you sign
those mortgage papers you absolutely have to make those
payments. If you don't have the amount of the pre-payment
penalty in savings, you are locked into making the payments or
losing the house.
Two Year Mark - Keep in mind that after 2-3 years from the date
of the bankruptcy discharge, mortgage loans will be much easier
to get. With a small down payment, you might even be able to get
a mortgage loan without a pre-payment penalty. So, if you are
within 6 months or so from the 2 year mark. It would be smart to
wait it out and have more mortgage loan options.
Setting Yourself Up For Failure Again? Borrowing Too Much? - If
you do decide to buy a house. Buy one that you know you will be
able to afford. Don't max yourself out on credit, living right
up to the edge of your income. If your income suddenly drops,
you'll want to make sure that you can still afford your house
payment. Be conservative with how much home you need to buy.