subject: Acquiring property through secured loans [print this page] Acquiring property through secured loans Acquiring property through secured loans
Can I purchase a property after filing bankruptcy? This is a very common question for debtors who seek bankruptcy protection. The answer is "Yes, you can". Bankruptcy erases most debts, making individuals' debt free. It is commonly referred to as a "Fresh Start" by attorneys and consumer credit history.
Borrowers, who had previously filed for bankruptcy, have more ability to repay back new debts for a number of reasons. First, such borrowers have fewer monthly payments, giving them the ability to make large payments. Second, during bankruptcy procedures, consumers are referred to undergo credit counseling, where debtors learn how to manage their income and live within a budget. And third, while in bankruptcy, debtors restructured their life style to fit their current income.
Are there any limitations? The answer is "yes and no". "Yes" because lenders will require more income, a bigger down payment, and/or a cosigner. "No" because such limitations were already in place when lenders faced debtors with shaky credit history. In short, bankruptcy will only make debtors' situation better as bankruptcy erases unsecured debts making room for secured debts to be placed.
Of course, a difference exists between obtaining a real property and other private property (such as a vehicle). Real property has a higher value in contrast with other types of property. Real property's value depends on the market, not age. And most importantly, real property provides secure collateral as it can't be moved and ownership rights are more defined. Potential buyer's credit is only one factor among other factors that lenders consider, such as employment. Most likely, borrowers who had filed for bankruptcy in the past will be asked to make a larger down payment. Lenders, also, can use different financing products that carry higher interest rate for the first couple of years. In all cases, borrowers, after establishing a solid payment history for at least 18 month, can easily refinance their existing mortgage on the bases of term and interest only (no cash out).
As for purchasing a vehicle, borrowers who had filed for bankruptcy can easily acquire such loans. It will take longer and more effort on the borrower side. Moreover, as the price of the vehicle is higher, the bigger of a down payment will be required from the borrower. It is always advised for such borrowers to purchase a small used vehicle first before attempting to purchase a new one in order to buff their credit history.
