Mortgage After Bankruptcy - Credit Factors To Consider Before You Buy Your Dream Home

When considering a mortgage after bankruptcy it is a good idea to realize that the lenders take a very close look at how the borrower has handled finances in the recent past. Depending upon your actions over the past 12 to 24 months, you may have made great strides.

Reestablishing old accounts, establishing a solid record with new accounts, regular contributions to a savings plan, payroll deductions that go into your children's college fund - all of these actions indicate a strategy for financially healing and compensate somewhat for bankruptcy.

Similarly, if you had lots of slow pays and collection accounts just a few years ago, but your recent record is good, make those newer numbers look even stronger.

A tactic that helps anyone plagued by credit problems who wants to demonstrate creditworthiness and a mortgage after bankruptcy is to get a secured credit card, or debt card. A bankruptcy or a record of seriously slow pays and collections is like a dead skunk in the middle of the road to credit card companies and mortgage lenders. They want to get as far away from you as possible. A number of banks, however, will provide you with a "credit" card that operates like an automated teller machine or ATM card. Although the limit is tied to the amount of money available, just as a check is, the record of payment on the account is reported like that of any credit card.

You can get a mortgage after bankruptcy and you can build good credit without having any credit extended to you. If you have had credit problems, no doubt one of the banks that offer this service has sent you a promotional mailing or will in the near future. This is not a scam. This is a legitimate method of rebuilding your credit.

Elements of Credit Scoring to Consider with a Mortgage after Bankruptcy

The complex formula for scoring assigns the greatest weight to the absence of problems, them brings your score down according to what problem or condition is noted and how old it is. Some of the problems and conditions to consider with mortgage after bankruptcy that reduce your score are as follows, according to the Beacon system.

1. Current outstanding accounts
2. Not all account paid as agreed
3. Too few bank or national revolving/open accounts.
4. Number of accounts with outstanding balances
5. Number of finance company accounts
6. Recent payment history is too new to rate
7. Length of time accounts have been established
8. No non-mortgage account balances, or non-mortgage balances not recently reported
9. Number of accounts currently or in the past not paid as agreed
10. Too few accounts currently paid as agreed
11. Amount past due on accounts
12. Account not paid as agreed, public record, or collection agency filing

These are just a few of the issues that are considered with a mortgage after bankruptcy or any type of mortgage loan for that matter. Your bankruptcy should be at least 2 years since it was discharged to start the process of looking to buy a home. During this 2 year period is an opportunity to re-build and establish a good credit record so you can get a mortgage after bankruptcy and purchase your dream home.