Bankruptcy can feel like a dirty little secret that no one wants to talk about because there was a social stigma associated with it. However, life does go on after bankruptcy. Approximately 800,000 people every year have to file for bankruptcy for one reason or another, so it is not as uncommon as one might imagine. At one time, a person that had to file for bankruptcy was thought of as a person that was irresponsible with their spending, and deserved to have to file. The Great Recession opened a lot of peoples eyes to the reasons that people file for bankruptcy, and eased the stigma of bankruptcy.
If you have found yourself in this situation, you may be wondering how long you have to wait before you can buy your Ocean Edge condo after bankruptcy. Although filing for bankruptcy may put a hold on purchasing your Ocean Edge condo, it doesn’t have to stop you from your dream of owning your own condo for long. Here is our guide to the different types of bankruptcy and how soon you can go ahead and purchase a property again.
Types of Bankruptcy
What is bankruptcy? Bankruptcy is an option for many people for a variety of reasons. Filing for bankruptcy can be a way for someone to eliminate a person’s debts entirely or a way for a person to set up a plan to pay off their debts. There are some types of bankruptcy that are easier to recover from than others. Chapter 13 and Chapter 7 are the two most common personal bankruptcy types. Chapter 7 eliminates all of your debt, while Chapter 13 means that you need to repay your debt that has accumulated within a period of time (usually 3 to 5 years).
Since Chapter 7 eliminates your debt, leaving you with a clean slate, it is easier to recover from and you will be able to get a mortgage quicker than with Chapter 13. With Chapter 7, your income to debt ratio is appealing because there is no debt, which is appealing to a bank or mortgage lender. In order to get a FHA loan before you are finished paying off your debt with a Chapter 13 loan, you could apply for a FHA loan if you meet one of two criteria. Either 12 months of payments must be made towards your plan or the court approves your request to purchase a house with a FHA loan.
Debt and Credit
Filing for bankruptcy will put a dent in your credit score, there’s no way of getting around it. Typically when a person files for bankruptcy, they will find themselves with a credit score of about 607. Since you will then have a less than desirable credit score for a mortgage, the interest rate you are charged will be higher than the rate for a borrower with a higher credit score if you do get a mortgage product. A higher interest rate means paying more money per month towards your mortgage, which is not going towards paying off your Ocean Edge condo.
How do you fix your credit score so that you can get a lower interest rate so you can purchase your Ocean Edge condo after bankruptcy? The only way you can fix your credit score after bankruptcy is by building up your credit the old fashioned way. Open a credit card and start building your credit by making on time payments on the card. Be responsible with your spending and set little reminders so that bills are not missed, but paid on time or a little early. For more tips on how to build up your credit score, check out our blog, “Credit Score in the Toilet? Fix it before You Buy Your Ocean Edge Condo.”
When Can You Buy Your Condo
Figuring out when the clock officially starts on your bankruptcy can be confusing. You want to know when you can put this behind you, and finally purchase your Ocean Edge Condo after bankruptcy. Some people believe that it starts when you initially file your paperwork and others believe that it is the discharge date. What do you believe? What date do lenders look at when you are trying to buy a home of your own? The answer is that the discharge date is the date that is important, not the bankruptcy filing date. Although there is no definite waiting period, you can expect to have to wait about a year and a half to two years before applying for a mortgage after bankruptcy.
Different lenders and loan products require different waiting periods before you are eligible for a mortgage. USDA Rural Development products require Chapter 7 filers to wait three years after discharge, and only one year for Chapter 13. VA (Veterans Administration) and FHA loan products typically require two years after discharge, but you could have to wait up to four years to be eligible for a conventional mortgage after bankruptcy discharge. Although this can feel like a long time to wait to buy your Ocean Edge condo after bankruptcy, you should use this time wisely and build up your credit. Building up your credit will help you when you are able to purchase your condo after bankruptcy.
How to Purchase Your Ocean Edge Condo After Bankruptcy
Filing for bankruptcy can be a blow to your credit score and ability to get a mortgage for some time, but it should not be a blow to your ego. So many Americans find themselves in the position of having to file for bankruptcy, as we saw in the Great Recession and it is nothing to be ashamed of. Take the time that is required before you are able to purchase your dream condo to build back up your credit and savings, before purchasing your home. Taking care of your affairs during your waiting period will set you up for success when you do purchase your Ocean Edge condo after bankruptcy. Contact the professionals at Leighton Realty when you are ready to buy your Ocean Edge condo after bankruptcy. Michael Leighton has been the #1 Agent at Ocean Edge since 2004 and the #1 Agent for Brewster since 2007.