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Tips for First-Time Home Buyers After Bankruptcy and Credit Repair

Qualifying for a Mortgage After Bankruptcy

Lenders understand that after your Chapter 7 or Chapter 13 bankruptcy, you have less debt to pay and more money to pay a mortgage. In most cases, you will have to wait for two years from the date of a Chapter 7 bankruptcy discharge date. Meanwhile, a Chapter 13 bankruptcy, which is a three to a five-year repayment plan, after 12 months of on-time bankruptcy plan payments, you can get an FHA loan.

Most people don’t take advantage of bankruptcy options because they think it still takes so much more time to qualify for a mortgage after a bankruptcy case. You too can be one of the many home buyers after bankruptcy.

Learn About Your Credit After Bankruptcy

Chicago Bankruptcy Attorney Joseph Wrobel Will Help You a Fresh Start Today! Call Joseph Wrobel, Ltd. at (312) 781-0996

Saving For a Mortgage Downpayment After Bankruptcy

While many people still put down 20 percent, there are many lenders who will approve mortgages with a 3 percent downpayment on a home. There are first-time homebuyer programs that allow new mortgages for 3 percent down.  When you take advantage of a low or no money down mortgage, you might need to pay for mortgage insurance, and will affect your monthly payments.

Some of the loans that work for people who want a new home but do not have a 20 percent downpayment include conventional mortgages, FHA loans, and VA loans. These are great for home buyers after bankruptcy.

A conventional mortgage is a good option for homeowners because the costs can be lower than other options when you have a high enough credit score, of at least 620 and a debt-to-income ratio of 50 percent or less. Note that these are general criteria and results may vary.

An FHA loan is insured by the Federal Housing Administration, a part of the U.S. Department of Housing Development. An FHA loan may be available for buyers with a credit score of 580. A mortgage insurance premium (MPI) is commonly required and can be paid upfront or it could be part of your monthly mortgage payments.

A VA loan is backed by the U.S. Department of Veterans Affairs and can be secured without a down payment. VA requirements for loans can include a higher credit score and an updated home appraisal.

Mortgage Application Tips to Get the Best Deals After Bankruptcy

Find a mortgage broker who can run your credit and tell you where you are now, and where you need to be financially to be approved for a mortgage. Being approved for a mortgage requires your application to satisfy several criteria. Your mortgage application might be graded differently by a variety of lenders and your broker should know which company may offer the best deals to home buyers after bankruptcy.

Once you have a copy of your credit score you have a baseline for improvement. You can take advantage of one of many credit repair programs to increase your score before applying for a mortgage. It is important to not assume any new credit obligations within a few months of your credit application because new account activity can reduce your credit score.

One of the things you will learn about credit scores is that the percentage of credit used is very important to a good score. If you have a credit card with a limit of $1,000, your credit score reports highest when you only use 20 percent of your limit at the end of your monthly billing cycle. A best practice is paying your credit card down right before the end of the monthly cycle so you owe the least amount at that time of the month that is reported to the credit bureaus.

How Much Can You Afford Without Drowning in Mortgage Debt

People who recover from money problems can rebuild their finances and credit by controlling their spending. When considering applying for a new mortgage, it is important to figure out how much you can afford every month without falling behind. For example, an unexpected car repair or medical bills can make an expensive mortgage payment difficult.

DaveRamsey.com: Don’t Be House Poor, Dave Recommends that your monthly mortgage payment be 25 percent or less than your take-home pay.

Consider what you really need in a new home and how much space is necessary for you and your family. A home in an established neighborhood with good construction can cost less than a new construction home. Affordability is important and you are more likely to feel financially stable when you have an affordable monthly mortgage payment, like many home buyers after bankruptcy.

Research Communities and Neighborhoods that Fit Your Needs

What are your top priorities in a new home and community? You and your family have several needs that include a good commute, good schools, and a safe place to live with plenty of amenities. Every family has a list of needs and a list of wants when looking at buying a new home. Once you narrow down the best communities and find a few neighborhoods that fit your family, it is time to start going to open houses.

Niche: 2019 Best Neighborhoods in Chicago

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Attending open houses can help you get ideas about what people have done to update houses and add features such as a patio, hot tub, or a pool. Especially if you are considering homes built several decades ago, you might notice how some owners removed walls and remodeled older homes to make them more open and attractive to buyers. The cost of some minor home remodeling and construction can make buying an older home in a settled neighborhood more attractive to home buyers after bankruptcy.

Be Prepared for Closing Costs and Expenses After Moving Into A New Home

Closing costs could be 2 to 5 percent of the loan amount for your new home. Your realtor can help you with opportunities to negotiate with the seller to cover some of the closing costs if there are reasons to reduce the selling price and a closing costs compromise is an option.

People buying new homes should be prepared for the cost of adding necessary furnishings, appliances, and updated fixtures. For example, if you buy a new home and want window treatments and other fixtures, the costs can add up quickly. This is another reason that an older home that already has all you need might be an attractive option.

Chicago Bankruptcy Attorney Joseph Wrobel Can Get You a Fresh Start So You Can Rebuild Credit and Save Money to Be Among Many Home Buyers After Bankruptcy.

Myths About Bankruptcy in Illinois: Debunked by Joseph Wrobel

Chicago Bankruptcy Lawyer Joseph Wrobel Debunks Myths About Bankruptcy in Illinois

There are all kinds of myths about bankruptcy and the truth about bankruptcy gets more appealing when people learn how a bankruptcy case actually works. You can ask for a Chapter 7 full discharge or a Chapter 13 partial discharge and repayment plan. If you need to keep your home and car, we have options for you. When searching online for information about how bankruptcy in Illinois works, it is important to get your information from an experienced Chicago bankruptcy lawyer who can dispel myths about bankruptcy in Illinois.

Myths About Bankruptcy in Illinois
Helping people get out of debt with dignity and respect for over 40 years – (312) 781-0996

Myths About Chapter 7 Bankruptcy in Illinois

People worry about losing their property in bankruptcy in Illinois. Do not worry, because most of your important property asset exemptions. The Illinois Homestead Exemption allows you to keep up to $15,000 in equity in your home. The Illinois Motor Vehicle Exemption up to $2,400 in one motor vehicle is also allowed. You can also keep personal property up to $4,000. There are also exemptions for a list of additional categories.

Chicago Bankruptcy Lawyer Joseph Wrobel Can Help You Today at (312) 781-0996

Read our blog article, Bankruptcy Exemptions in Illinois to learn more about keeping your property in bankruptcies.

Myths About Chapter 13 Bankruptcy in Illinois

Despite myths, you can keep your house and save your mortgage with Chapter 13 bankruptcy. In a Chapter 13 you will repay a portion of your debts over a three to a five-year repayment plan. People might also think they do not qualify for a Chapter 13 bankruptcy because they make too much money. When people are looking for a Chapter 7 bankruptcy but they make too much money, they can file a Chapter 13 and enjoy its many benefits.

You can dismiss your bankruptcy at any time if your financial situations change, even if you are still in your Chapter 13 plan. You can also sell your home while in Chapter 13.

We answer all the myths about bankruptcy in Illinois in our article, What Everybody Should Know About Chapter 13 Bankruptcy.

Credit Rebuilding Myths Debunked

Bankruptcy will affect your credit score but it is not forever. Actually, Chapter 7 is on your credit report for 10 years and seven years for a Chapter 13. Meanwhile, despite what some think, your credit score can be repaired. After your bankruptcy discharge, you can get a secured credit card and start rebuilding your credit. The more you use credit responsibly, the quicker your score will rise.

People worry traditional credit card companies will never give you credit. Actually, as you rebuild your credit and you have fewer creditors after you, you are a better credit risk. A credit union knowing you had a bankruptcy, can make car loans based on your credit score and your current financial position.

Many people who had a bankruptcy get approved for mortgages within a few years of their bankruptcy. The Non-Prime Lenders website offers information about mortgage after bankruptcy.

Read our article, Good Credit After Bankruptcy

Housing and Apartment Rent Myths

People are worried about renting or buying an apartment or house after bankruptcy in Illinois. Do not worry about being out on the street. You can certainly rent a home or apartment after a bankruptcy, even if your credit score is not where you want it. Many larger rental companies frequently work with people in a bankruptcy or who recently completed a Chapter 7 or a Chapter 13 case. Sure, some smaller rental companies and individual owners with properties could deny you. But most will charge you a larger security deposit or ask for a co-signer. It is very rare to hear a case of someone not being able to rent a place to live during or after bankruptcy.

Some say you will never qualify for a mortgage after bankruptcy, and they are wrong. When you have more money to pay your bills, it can be easier to rebuild a good credit score for a mortgage in a few years. When you no longer have debts you are unable to pay, you are a better credit risk. If you are renting, you can improve your chances to get a better mortgage and lenders have options for buyers who had a bankruptcy.

The Myths About Employment and Bankruptcy

No, your employer cannot fire you because you filed for bankruptcy. Nor can an employer change anything about your employment because of a bankruptcy.

Public, government agencies may not use bankruptcy in the hiring process. Private employers are not likely to make hiring decisions based on whether someone had a bankruptcy. Private companies may ask to check your credit. While there may be certain special employment positions where bankruptcy could be a problem, for most people this is not a problem.

One of the common reasons people do file for Chapter 7 or Chapter 13 bankruptcy is to avoid pending wage garnishment. Through the process of taking advantage of the bankruptcy laws to stop a wage garnishment, the employer receives a notice of the bankruptcy.

Check out this ForRent.com article, Can You Rent an Apartment after Filing Bankruptcy?

Call Joseph Wrobel, Ltd. at (312) 781-0996 to Learn Answers to Myths About Bankruptcy in Illinois

Whatever your questions or concerns are about bankruptcy, call Joseph Wrobel. Ltd., the Chicago Bankruptcy Law Firm. Joseph Wrobel has been practicing consumer bankruptcy law for many years and has seen and heard just about everything. How do I start?

Every question you have is a good question. Call us to learn answers to myths about bankruptcy in Illinois by dialing (312) 781-0996.

Mortgage loan options after bankruptcy

There are several types of mortgages available in to home buyers after a bankruptcy discharge. After a bankruptcy discharge under Chapter 7 or Chapter 13 you may be able to qualify for a mortgage sooner than you think. When your debt to income ratio is better after discharging some or all debts, you may be a better lending risk when you have more disposable income to save money and pay bills. After your bankruptcy discharge you have some time to work on re-establishing your credit and saving money for down payments and closing costs. When you are ready to start shopping for a mortgage there are several options to consider depending on your personal situation and home ownership goals.

How long will I have to wait?

There are two types of bankruptcy, Chapter 7 (full discharge) and Chapter 13 (partial discharge and reorganization). Many people with Chapter 13 bankruptcies are approved for government-backed mortgages after one year or they could be approved for a conventional mortgage loan after two years. The Chapter 7 bankruptcy filers may have to wait three or four years after their discharge to be approved for a new mortgage.

Some people chose to take at least two years or more to rebuild their credit using secured credit cards and small loans, while also saving cash for the expenses involved in putting money down and closing on a new home. The longer you wait, the better interest rate you may get. This is not always true however because interest rates fluctuate.

Conventional and government-insured loans

The difference between conventional loans and those insured by the U.S. Government is the financial guarantee for the lender, in case the individual fails to pay the mortgage. Conventional loans are not guaranteed by the federal government, and because they are not secured, the buyer must have better finances.

The common government-insured mortgage loans are the FHA loans, VA loans and USDA loans:

  • FHA loans backed by the Federal Housing Administration allow participants to make down payments as low as 3.5%. Purchasers will be required to pay for mortgage insurance which increases monthly payments;
  • VA loans secured by the U.S. Department of Veterans Affairs help military service members and their families buy homes with 100% financing meaning the purchaser only needs to pay the closing costs.
  • USDA loans are insured by the U.S. Department of Agriculture and benefit rural buyers who satisfy income requirements including a steady middle class income who otherwise may not qualify for conventional loans.

Adjustable vs fixed-rate mortgages

If you are approved for a fixed-rate mortgage when interest rates are low you will be locked in at that low mortgage rate for the entire term of the loan and your monthly payment will not change. The other type of loan is an adjustable-rate mortgage loan (ARMs) which have interest rates that change from time to time based on interest rates. Some ARMs provide fixed rates for several years after which time the rate is subject to adjustment based on the rates at the future date. If interest rates are high on mortgages when you are applying, you might want an ARM so that you can try to lock in a better rate when the rates go down. You always have the opportunity to refinance your loan and select a fixed-rate mortgage after having an ARM for some time.

For more information about applying for mortgages after a bankruptcy, please call Joseph Wrobel, Ltd.

About us: Joseph Wrobel, Ltd., works with clients to find out if they qualify for Chapter 7 or 13 bankruptcy, and their options and rights under the law. The firm will also advise and assist clients with questions and concerns about the collectors and their rights to pursue you.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start.

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