FHA loans usually require a 2-year waiting period after bankruptcy, while Fannie Mae and Freddie Mac loans require four years... if a bankruptcy was due to mitigating circumstances like being laid off from a job, a lender may look at them more favorably.
Queens, NY (PRWEB) May 19, 2017
For many New Yorkers, filing for bankruptcy is a serious, emotional process. People and businesses that file for bankruptcy do so to take back control of their finances and get on the path to financial wellbeing. But sometimes the road after a bankruptcy can seem like a daunting one. Bruce Feinstein, Esq., a bankruptcy attorney in Queens, New York, has spent years working with clients on their plans to rebuild after bankruptcy. He recently spoke about the challenges and helpful plans one can take to get a loan after bankruptcy.
After a bankruptcy is discharged, an individual needs to take time to build his or her credit score. Rushing into getting a loan soon after bankruptcy can result in unfavorable loan terms, higher interest rates, or limited options, which can then draw people toward predatory online lenders, as explained in a previous April 30, 2017 PRWeb article by Mr. Feinstein. A Chapter 13 bankruptcy is typically removed from a person’s credit report after seven years, and a Chapter 7 bankruptcy will be scrubbed after 10 years. But there are steps to take towards better credit and better loan options in the meantime.
One fact to know about credit is that credit history plays a bigger part in getting a loan than a credit score. While both are related, a credit score is a number based on the analysis of a person’s credit files, and a credit history spans that person’s entire financial past. A good score may be inhibited by a serious financial mistake made several years ago, or several years of growing credit can show a person’s willingness to turn his or her life around. All in all, the loan approval process is different for each lender.
Another factor to take into account is the fact lenders don’t just look at a person’s credit score to make loan decisions. Mr. Feinstein explains, “Many lenders use a computer program to determine approval status, including systems from Fannie May and Freddie Mac. Once the program approves a borrower, the lender will then look at the borrower’s credit score to set an interest rate.”
And not every misstep is given the same weight when determining loans. If a person has a lien on his or her home, or is avoiding unpaid bills for long periods, attempts to get a loan will be very difficult. But people who have late bills and pay them off within a couple months will not turn off lenders. “It’s a matter of timing,” explains Mr. Feinstein. “FHA loans usually require a two year waiting period after bankruptcy, while the common Fannie Mae and Freddie Mac loans require four years. Even then, if a bankruptcy was filed due to mitigating circumstances like being laid off from a job, a lender may look at them more favorably.”
And if people are denied a loan after bankruptcy, there is still the option to apply elsewhere. According to MyFico.com, “Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, FICO Scores ignore mortgage, auto, and student loan inquiries made in the 30 days prior to scoring.”
Building a good credit score takes time after bankruptcy. But having more knowledge about the loan approval and interest rate process, shopping for the best loan, and actively building good credit can result in strong financial health.
The Law Offices of Bruce Feinstein has nearly two decades of experience in bankruptcy law, helping clients and families resolve their issues and move forward with their lives. Visit bfeinsteinesq.com for more information or call (718) 514-9770 to reach the New York office. ###