It Is Possible To Get A Home Loan After Bankruptcy
New Mexico residents who have filed for bankruptcy in the past can be successfully approved for a mortgage with the right approach and mindset.
While there are several advantages to filing for bankruptcy, it can be challenging to get back on your financial feet after doing so. Anyone in New Mexico who has recently filed for bankruptcy might be curious as to how they can be approved for a mortgage with a bankruptcy appearing on their credit report. Thankfully, it is entirely possible for you to get a home loan after bankruptcy with some hard work and the right knowledge.
Take care of your remaining debts
Before you even think about applying for a mortgage after your bankruptcy, pay off your current debts as much as possible. Specifically, it is your credit card debt that has the biggest impact on your credit score, so you will want to focus on that the most. Taking care of your current debts builds your credit score and repairs your credit report, showing lenders that you are making an effort to rebuild after your bankruptcy.
Embrace the waiting period
Even if you feel you are ready to apply for a mortgage, you might have to wait a bit longer. Your total wait time depends on whether your old home went through foreclosure, which will likely mean a longer waiting period. No matter how long you have to wait, make the most of it by working on your credit, saving up for your new home’s down payment and developing healthy spending and saving habits to better avoid having to file for bankruptcy again in the future.
Avoid additional loans
It is best that you only use cash for future transactions after bankruptcy. Having other loans on your credit report after bankruptcy and before applying for another mortgage could make lenders see you as an even bigger risk than you already are. Remember, even without bankruptcy, your debt-to-income ratio is a huge factor when it comes to being approved for a mortgage or any other type of loan.
Know that you might have to explain your bankruptcy
When you are finally ready to apply for a mortgage after bankruptcy, know that you might have to explain why you had to file for bankruptcy in the first place. Rather than be embarrassed, use this as an opportunity to show how you have grown and learned from your experience and what you are doing to rebuild your financial house. Lenders might be more understanding than you think, and they are sure to be more willing to approve you for a mortgage if you show you have turned what some might see as a tragedy into an opportunity to improve yourself.
If you live in New Mexico and would like to apply for a mortgage after bankruptcy, know that the odds are not entirely stacked against you. For more advice on recovering after bankruptcy, get in touch with an experienced lawyer.