Affect of Bankruptcy on Future Home

Before learning about the effects of bankruptcy to your future home purchase, you have to learn first how one gets there. No one wants to be in that situation. Aside from the fact that it is stressful, it can also cause a lot of other problems like losing your home and other valued properties. Ever wonder how you got there?

One of the major reasons why someone faces bankruptcy is mismanagement of finances. People spend more than what they earn. They fail to anticipate that something could go wrong like losing their job. Other events that can alter their financial balance are medical treatments and death of a family member.

Over used of credit cards and paying, only the minimum amount is another reason. The debt accumulates as well as the interests until such time that the person can no longer keep up with his payments. In addition to that, he also has to pay the bills, the rent and other obligations. There could be mortgage loan and car loans waiting to be repaid. All the above situations can be avoided if one learns how to manage his finances well. He can also invest in important things such as health and life insurance. He can also have an emergency fund to have something to use when something goes wrong. It is also essential that he gets an honest assessment of his finances before he applies for mortgage or car loans. These steps are very important in order to avoid bankruptcy.

Bankruptcy can affect your future home purchase in several ways. It can affect the right time to purchase your dream home. Most lenders will ask you to wait at least two years before they can approve your application. Two years is enough time for you to repair your credit scores. However, this can take as much as three years or more if you do not exert efforts.

You can still apply for mortgage though even if you have not yet repaired your credit. However, you will have to make a bigger down payment. You can also expect that the interest rates offered to you is higher than those that are normally offered. You cannot blame the lenders for this because they also have businesses they want to protect. Since this is the case, it would be more difficult for you. You have to look for the amount to make the down payment and you have to pay high monthly premiums because of the high interest rates. You need to do this while repairing your credit. Remember, you still have to repair your credit records even if your loan has already been approved. This is because you want to refinance your loan once your credit is good.