You can get a Home Loan after Bankruptcy
Life happens! You lose your job, you lose your house, your car is repossessed, and then to keep the creditors from hounding you at all hours of the day, you file a bankruptcy. Well, what did they expect? It’s not like you’re a deadbeat. It’s not like you went to work and asked the boss to terminate you so you could go home and eat Bon Bons. No, you lost your job and no matter how much you want to pay your obligations, there is simply no way to do it. You don’t deserve to be harassed. Nevertheless, creditors hound you like a dog. So, you file for bankruptcy.
Types of Bankruptcy in Australia
Part 9 or 10 Debt Agreement: A person repays at least a portion of their debts.
Files for Bankruptcy: A person does not repay any of the debts. Bankruptcy stays on your credit file for up to five years.
After the Bankruptcy
After the bankruptcy, your credit scores plummet. Your credit history report shows that you have been 30 days late, 60 days late, 90 days late, then 120+ days late paying your debts… and then bankruptcy. This history remains on your credit history report for at least five years normally however can be up to seven years for serious offences. Your credit history is labeled as a “bad credit history”. But, listen, you’re not bad; your credit history is bad. So, let’s separate you from your credit history. Let’s look at what we can do to change a bad credit history to a good credit history. The kind of credit history that can possibly get you a home loan after bankruptcy.
The first thing you want to do is bring up your credit score. Now, I know you just had a bankruptcy and no one wants to loan money for you to buy a house… right now. But that’s only a stumbling block. You can overcome it in a couple of ways.
Get a small, manageable loan. Even a loan as small as $250 to $500 will serve a great purpose. The idea here is that you want to start building a “good” credit history. One way to do that is to get a loan that you know you can pay back in monthly payments. There are two types of loans that serve this purpose – secured loans and unsecured loans.
Secured Loan: – Secured loans are loans where you place something valuable like a car or other property as collateral for the loan. This property should be worth enough to cover the value of the loan. The creditor will tell you what they are willing to use as collateral. Then, if you should miss a payment, the creditor can take the property from you, sell it, and get their money back. That’s fair, right?
Unsecured Loan: – Unsecured loans are loans that are not secured by any property. They are more difficult to obtain. With this type of loan, the creditor has to trust that you will pay them back, because if you don’t pay them back, then all they can do is keep sending you notices until you pay.
But, we know you’re going to pay your loans back because the whole idea of getting a loan, secured or unsecured is so that you can start generating positive remarks on your credit history report. The better your credit looks at the time you apply for your home loan, the better the chance is that you will be approved.
I have seen people improve their score by 35 to 50 points in a year’s time – just by paying their current debt on time every time. So, that means that all you have to do is make timely payments and you could raise a credit score of 500 to 650 in as little as three years.
For more details of what score lenders look for, read my article titled, “What is the minimum credit score for a Home Loan in Australia”
How Lenders Rate Credit Scores
Good: 700-800
Average: 650-699
Bad: 549 or lower
The rating and scores are guidelines that lenders use as a starting point for considering your credit worthiness.
WARNING!
Lenders who specialize in lending money to people with bad credit have higher fees and less favorable terms for the borrower. In other words, it will cost you more to get the loan. Just make sure you pay close attention to the fees and the terms before you sign for the loan.
What Type of Home Loan Can You Get After Bankruptcy?
Well, depending on your credit score, there are several options available. There are actually online lenders who specialize in providing home loans to people after bankruptcy.
Work only with a credible and experienced Non Conforming Lender or Broker. Ask family, friends, and co-workers for their recommendation to a mortgage broker. Contact the broker and ask about their experience in working with people with less than perfect credit. Listen to their response to hear whether or not they offer hope for a favorable outcome. Do not work with anyone who makes you feel bad about your credit history. Lenders who have a good attitude are willing to search for opportunities and solutions to help you toward the goal of getting a home loan.
How Soon Can You Apply for a Home Loan after Bankruptcy?
Generally, you have to wait at least two to three years after a bankruptcy before applying for a loan through a traditional lender. The alternative, easier loan programs, like a Bad Credit Home Loan have shorter time qualification standards. For example, we have compassion for people who have been afflicted by the recession and lost their jobs, so we have added “economic events” to our list of “extenuating circumstances”. You can now claim extenuating circumstances to explain your low credit scores. With that as an explanation, the waiting time to apply for a home loan after bankruptcy is reduced from two years to one day from discharge.
The minimum qualifications for receiving a home loan after bankruptcy are:
- Stable Employment
- Deposit of 5% plus costs required in high population areas
- No further credit issues since filing for bankruptcy
Yes! You Can Get a Home Loan After Bankruptcy!
Don’t let a bankruptcy stop you from having the Australian Dream. Work on raising your credit score and you can start thinking about applying for a loan to purchase your home.
