Orange County Bankruptcy Attorney
As an Orange County bankruptcy attorney, we speak with a lot of clients that have significant debt and want to file bankruptcy but also want to buy a house in the near future. Unfortunately, this poses a bit of a challenge as the two don’t work well together. Once a bankruptcy is on your credit report, you can buy a home but not right away. With this in mind, here are some things you should consider.
Your credit score impacts your ability to get a home loan.
Typically, you need at least a 620 FICO score in order to buy a home, and most lenders want to see a 680 or higher. It is a good idea to pull your credit and see what your scores are before deciding whether or not to file bankruptcy. If your credit score is still good, but you simply can’t meet your obligations, you may be better served by having us help you to negotiate with creditors. After all, if you can get your monthly payments reduced, you may not need to file in the first place. When you do file, your credit score will go down.
Your payment history impacts whether or not you can get a home loan.
During the underwriting process, a lender will look at whether or not you have been paying your other debts on time. If you have a lot of late payments, they probably won’t approve your loan. Most people that speak with an Orange County bankruptcy attorney do so because they are already behind on their bills. If this is the case, your best bet is to file bankruptcy so that you can start to build good credit history again.
Time heals all wounds.
This common saying applies to your credit as well. Even if you are late on your bills now and end up filing bankruptcy, in time, you can rebuild your credit to the point that you can purchase a home using a mortgage loan. The first thing you need to do is create new credit history with on-time payments and a low usage ratio. For example, after filing for bankruptcy you may be able to get a prepaid credit card. This a card that you put cash onto and use before paying it back. Sure, you are using your own funds but this is a good credit repair tool.
Simultaneously if you have a prepaid card for $500, you should only use $250 or less at a time to demonstrate that you aren’t maxing out your available credit again. These things will help to improve your credit score.
As an Orange County bankruptcy attorney, we have clients that have applied for a mortgage loan through the VA and FHA within two years of filing a Chapter 7 bankruptcy. Traditional lenders may require you to wait for four years before doing so but in both scenarios this gives you time to rebuild your credit score.