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Loan after Bankruptcy?

You can still get mortgage financing.

If you feel the need to get a loan after you have recouped your losses, there’s a high possibility that you will be granted one. But it won’t be easy.

Obviously, you are more likely to get rejected than a first-time homebuyer. Your credit history should have gone to rehab before you decide to apply. Normally, mortgage officers would review your credit background for the last 10 years.

If you have filed bankruptcy in the last seven years however, you should bring the following:

A copy of petition and discharge
All documents that you file in the court must be kept for future use. Likewise, after you recover from bankruptcy, you should file all papers forwarded to you. You will receive a copy of the discharge through mail indicating which debts are already discharged. If you don’t receive one after a considerable amount of time, you should contact your court’s clerk office.

Check out this sample letter of discharge .

Handwritten explanation of the reason for bankruptcy
When explaining the cause of your financial failure, it is better to be honest than to cover up your mess. In fact, you shouldn’t be too worried with what to write. It is to your advantage that you’ll be sincere. However, avoid being too straightforward as well.

If your reason is that you’ve invested your life-time savings in a Madoff-like scam, don’t state, “…I thought that the company’s assurance of doubling my investment in 6 months so I took all my money from the bank that was supposed to finance my daughter’s college degree. In the end, I haven’t recovered my money.”

Why not write, “… Along with hundreds of investors who were victimized by ABC Company, I was not successful in recovering my money. I learned from this mistake and decided to take a second job as an administrative staff in a travel agency.”

Here’s a sample letter of credit challenged buyers from FICO.

Evidence of excellent credit since the bankruptcy
Get your FICO score and have access to all of your documents that prove you have settled your debts on time. Mortgage officers would see you more motivated if you bring payment receipts with you during your application. Other documents include:

  • name, address, and all income earned from all employers for past 24 months
  • copies of previous two years W-2 forms
  • copy of most recent year-to-date pay stub
  • name, address, account number, monthly payment and current balance for: installment loans, revolving charge accounts, student loans, mortgage loans, and auto loans
  • name, address, account number, and balance of all deposit accounts, including: checking accounts, savings accounts, stocks, bonds, etc.
  • three months most recent statements for deposit accounts, stocks, bonds, etc.
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