Proving You’re Creditworthy After Emerging from Bankruptcy
Writer June Fletcher from the WSJ advises on how to qualify for a mortgage after going through Chapter 13
By JUNE FLETCHER see http://online.wsj.com/article/SB125267733954803123.html?mod=googlenews_wsj
Q: I’m applying for a mortgage after going through Chapter 13 bankruptcy four years ago. All my debts were satisfied over a year ago. The lender asked for a letter of explanation regarding the bankruptcy, and I supplied one. Now they want more detail. I’ve been extremely careful with finances since the bankruptcy. How can I prove myself creditworthy?
–Greensboro, N.C.
A: Despite today’s tight credit market, you have already proven yourself creditworthy and should qualify for a mortgage, according to several Greensboro lenders and mortgage brokers.
But you should expect to pay a bit higher interest rate than someone who hasn’t been through bankruptcy–perhaps a quarter percent more than the market rate, according to David Gulledge, senior vice president of Cunningham and Company, an independent mortgage banker. You’ll also need to document the circumstances surrounding your bankruptcy in detail, as well as your attempts to re-establish your credit.
For instance, if you declared bankruptcy because of illness, you’ll need to show doctor bills, as well as proof that you are now better and able to work. If you got in financial trouble while you were married and were jointly responsible for expenses–and are now separated or divorced and no longer liable for them– you will have to show the legal papers that prove this. If you lost your job, you’ll need proof, such as tax records, that you have been steadily employed for at least a year since the bankruptcy.
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