Where is the manual that tells you how to start over after a bankruptcy or foreclosure? You would think with the magnitude of people who have filed for a bankruptcy or have experienced a foreclosure, that someone would put together a list of steps people can follow to start over, strategies to re-build their credit and get their finances back on track! We are here to help!
There is a reason why both bankruptcy and foreclosure are lawful and legal protections. Sometimes circumstances brought on by unwise decisions or unanticipated circumstances leave borrows with little choice than to declare bankruptcy or allow their home to be foreclosed upon.
Because bankruptcy often severs the borrower from much of the debt obligation, lenders in the future will consider an individual who has declared bankruptcy a considerable risk. Mortgage creditors also view a person that has had a foreclosure a considerable risk. In fact, to a mortgage company, it is the most serious of all derogatory items. In both scenarios, scores can drop by hundreds of points and take years to rebuild.
But people do rebuild! Even though it doesn’t seem like it will ever happen as you go through the bankruptcy or foreclosure process, people do find that there is life-and good credit- after them.
A person must move forward with a diligence to pay all their bills on time over a long period of time. Gradually credit will be restored, trust regained. This process is call “re-establishing credit”. There isn’t a fast fix. Mortgage loan rules allow a person to have access to mortgage credit again only after a prescribed waiting period has elapsed and credit history has been re-established. The waiting period is different depending on the loan type you wish to use and your individual circumstances. In most cases, a minimum of a least two years will be required to have elapsed since your significant derogatory was finalized.
The period after a bankruptcy or foreclosure is an area of time that will be of interest to the underwriter. This may be a determining factor in your loan approval. While they might understand that a bankruptcy or foreclosure is a legal option available to a person, they will be looking to make sure the pattern of payment after this derogatory credit event has improved, and late payments are not the norm. Rather, they are looking to ensure bills are paid on time during the required waiting period before applying for a new loan. This allows the borrower the opportunity to prove they have moved past this event and are ready to handle this new financial obligation for which they are applying. We will review this and discuss this area with you should it apply.
