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The Truth About New Home Buying and Bankruptcy
After bankruptcy mortgage home loans for real estate? Families who want to buy real estate, may have a better chance than they once thought.
Phoenix, AZ (PRWEB) January 16, 2005 -- In the past, traditional mortgage lenders have automatically rejected people who had declared personal bankruptcy. Homebuilders and Realtors alike have had concerns with potential home-buyers with volatile financial histories, especially those with bankruptcies.
Homebuilders often begin construction long before the potential home-buyer is approved for mortgage financing. Naturally, for homebuilders there are risks involved with home-buyers that fall short of loan approval, leaving financially strapped potential home-buyers at a major disadvantage with homebuilders.
Many potential home-buyers felt that they must wait at least seven to 10 years after a bankruptcy to be eligible to become homeowners," Says Kendall Matthews, a Certified Realtor with Keller Williams Realty and Home Loan Consultant with L&G Mortgage Banc in Scottsdale, Arizona who specializes in working with families with credit issues, This common misconception has given way to a more favorable approach to mortgage lending. "
While some people declaring bankruptcy had had trouble managing their money, a large number of those have simply experienced unfortunate events: job layoffs, death of a spouse, medical problems or failure of a company. Americans are filing bankruptcy at record bankruptcy at record-high levels over the last five years.
Though a bankruptcy is certainly a blemish on a credit report, it does not necessarily disqualify a borrower from obtaining a mortgage. Recognizing that sometimes-bad things happen to good people, some select loan officers are becoming wiling to take a calculated risk when it comes to people who have declared bankruptcy.
Some lenders use a scoring system to determine whether potential buyers are a worthwhile risk. Unfortunately, bankruptcy gives an automatic low score. However, select lenders are beginning to look beyond the scores and look at the individuals in need.
It is important to first understand the different types of bankruptcies:
·Chapter 7: A personal bankruptcy where all debts are discharged after court approval.
·Chapter 13: A personal bankruptcy where the court approves a repayment arrangement typically lasting 3-5 years. Once the debt has been repaid the court discharges the obligation.
·Chapter 11: A business bankruptcy sometimes involving a business reorganization and debt repayment.
Instead of waiting two or four years after being discharged from bankruptcy, some mortgage professional are willing to give a home loan much sooner, allowing more people to buy real estate. Those who have declared Chapter 7 bankruptcy liquidation may be eligible for a loan one year after discharge, and those who have declared Chapter 13 may be eligible for a loan even while still reorganizing.
Another common misconception is that a previous bankruptcy on your credit report will require you to have a large down payment (20 percent or more) and pay extremely high rates (10-15 percent) and points. There are currently programs available with as little as 3 percent down with very attractive rates and points.
Some lenders are even prequalifying buyers for a loan, saving time and making the home-buying experience easier and more efficient.
When a buyer prequalifies, they will have the advantage of greater negotiating power," Matthews said.
With a pre-approved approach, home builders need not worry if a potential buyer will receive mortgage funding."
No matter what the situation, select mortgage professionals have a program that will work for the buyer with a bankruptcy history. Without knowing the available options to home-buyers with a declared bankruptcy, sales agents at models may discard qualified applicants. If a buyer cannot get approved, there are customized plans that can re-establish credit to help the buyer become mortgage-ready, ensuring homeownership in the future.
It is important for the lender to see that the borrowers bankruptcy problems are behind them," said Matthews, That they have shown the ability to repay their obligations in a timely manner."
New home developments are planned far in advance, in most cases two to three years. Mortgage-Ready programs rehabilitate financially troubled candidates and keep them legitimate home-buyers allowing them to stay within the development and purchase in subsequent phases.
Because of new options, bankruptcy no longer needs to stand in the way of getting a home loan. And, homebuilders will not be stuck with a home customized to the tastes of a buyer who is unable to obtain financing. With the help of more creative lenders, those who have experience financial difficulty will have an easier time getting a mortgage.
Kendall Matthews is managing Realtor and home loan consultant of The Home Essential Group, located in Phoenix, Arizona, his team helps families find lovely homes for low down payment. For special mortgage funding programs or mortgage-ready kits, Kendall can be reached at 888.462.3771 ext. 220 or www.StressLessHomeLoan.com
Contact Information:
Kendall Matthews
The Home Essential Group
602.561.4270
888-462-3771 ext. 143
www.HomeEssential.com
www.HassleFreeHomeLoan.com
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