How bankruptcy affects mortgage qualification

How bankruptcy affects mortgage qualification

| Jun 30, 2021 | Uncategorized

Your credit will certainly be harmed after filing for bankruptcy in Michigan bankruptcy. However, it’s not the end of the world, and it can be the first step in beginning to rebuild your financial situation. While a mortgage may not be easy to come by at first, rebuilding your credit could mean that you could eventually secure one.

Bankruptcy hurts your credit in the short term

Mortgage standards have been tightened over the last decade in the wake of the Great Recession. Lenders will closely scrutinize your credit history, and bankruptcy is very visible. In the short term, it would likely mean that you could not qualify for a mortgage. The more time passes after your bankruptcy, the stronger a case you may have for a loan. In many ways, bankruptcy is the first step to take to clear some of the financial issues that would have already kept you from qualifying for a mortgage.

You can rebuild your credit

After your bankruptcy, you can take steady steps to rebuild your credit. As you are able, you should smartly borrow money and establish a record of timely repayment. You could start with “second chance” credit cards and installment loans. However, you should take great care not to get in over your head when you are able to start borrowing money again. Mortgage lenders will weigh an applicant’s recent payment history more heavily when they make their credit decisions, so recovery could help.

Personal bankruptcy isn’t the end of the road for you. In many ways, it is the beginning of a new path. If you are facing a precarious financial situation and want to discuss how bankruptcy could help, contact an attorney to review your legal options. Do not let any preconceived notions get in the way of a fresh start.