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Affects of bankruptcy on purchasing house

Affects of Bankruptcy on Purchasing House

To buy a property without mortgage is out of question in today’s scenario and if a person files for bankruptcy then the chances of his buying a new home or refinancing his existing property are very limited. However with some extra expense they do get a chance to buy house or refinance their existing property. Due to the increasing cases of bankruptcy each year and the ever increasing demand of own house different options have come up.

While applying for mortgage loan in case of bankruptcy one must understand that his chances of getting a mortgage are very less as most of the banks, credit union or even individual money lenders will scrutinize the repayment option by the individual from all prospects. That does not mean that after bankruptcy you cannot buy your own house with a mortgage loan.

Apart from analyzing your existing monetary situation and your credit report in the past in case of bankruptcy the lenders will also investigate the period spent after the bankruptcy file was discharged. It is always suggested to apply for a fresh loan after a minimum of two years of bankruptcy file discharge. This will provide you some time to work on your credits and save some money for down payment. Start by repaying smaller loans like in credit cards to makeup your credit report. Also large down payment will also save you money on loan interest.

With higher interest rates or larger down payment for purchase of the house you can be eligible for sub prime loans also. But you need to have a very stable and high income for being eligible for this option.  Most of the time after considering the time spent is more between declaration of bankruptcy and mortgage application and the current financial status these loans are approved.

Applying for FHA (Federal Housing Administration) mortgage loan is considered another good option for purchasing home in case of bankruptcy. In this case the Federal government guarantees the pay back of loan to the bank or lender in case you fall short to repay the loan amount. This way the lender money is safe with the applicant. Also large down payment unlike other mortgage loans is not necessary here to approve loans.

Owner financing is another alternative for buying a house in case of bankruptcy. Here the owner acts as a lender and funds some portion of the total amount of transaction to the buyer. Mostly this scheme of financing is approved when the bankrupt individual has a big down payment against the purchase of the property. Also it is profitable for the owner under this scheme as apart from the transaction money he also earns interest on the loan given to the buyer and gets tax rebate too.

All these opportunity undoubtedly specifies that it is quite likely to buy a house even in case of bankruptcy but with an extra expense in contrast to normal buyer. So if you have spent some time after declaration of bankruptcy and saved big amount as down payment along with a stable and higher monthly earnings then you can easily start your movements towards buying your dream house with any one of the opportunities mentioned above.

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