Buying a home after bankruptcy doesn’t have to be a nightmare. In the real estate market of the past few years, it’s not uncommon for people with otherwise perfect credit to have resorted to bankruptcy to rectify home values that plummeted and the resulting negative equity positions. If you have bad credit because of a previous foreclosure or bankruptcy, all isn’t lost as you look to become a homeowner again. We’ve put together a few tips for you today to help guide you through the process. As with anything that’s been torn down, rebuilding credit after a foreclosure or bankruptcy takes time.

• Discharge Date: If you’re buying after a bankruptcy or foreclosure, you’ll need to wait 3 years from the discharge date to close on your next home. Yes, that’s quite a time, but you need to understand that lenders want to see that you can handle credit responsibly for a fixed time period.
• Loan Types: You’ll most likely be looking at an FHA loan for your next home after bankruptcy as the conditions are the most lenient. You’ll need a credit score of 620 and a 3.5%  down payment.
• Required Documents: 60 days of bank statements (personal and business if self-employed), 2 years of tax returns, affirmation of rent from a current landlord if you’re renting, and any other financial documentation that you want to use as collateral (IRAs, 401ks, etc).
• Loan Limits: Be sure to review the FHA loan limits in your area. HUD has a great resource for limits by state and county on their website.
• Finances: Most lenders want to see three months of PITI (principle, interest, taxes and insurance) in the bank. Set up a savings account especially for this and when you begin the application process, ask your lender or mortgage consultant if it’s wise to move that money into your main accounts. They’ll help you through the process.

We hope you’re staying warm during this chilly winter and we hope Puxatony Phil was right that we’re in for an early Spring! Have a great week and if you need ideas for something to do, have a look at our local events calendar and see all that’s going on in the greater San Juans region.

The Staff at San Juan Realty, Inc.