Is there any possibility of home ownership after bankruptcy?

By: Alex King

Bankruptcy is drastic but often helpful solution to a financial catastrophe. With the current negative state of the economy, more and more people are opting for the relief that bankruptcy provides, despite the new stricter guidelines that were implemented in October of 2005. If you are one of the millions of individuals who has filed for bankruptcy and you are interested in rebuilding your credit, think positive because it is possible.

Despite the fact that you have taken the most extreme way possible to straighten out your financial future, filing for bankruptcy does not have to be as bleak as you may believe. If you want to finance a car following a bankruptcy or get a credit card or two, you can. Even if you want to own a home following a bankruptcy, it can be achieved as well, as long as you choose the right route for your particular situation.

LAND CONTRACT

One way to achieve home ownership following a bankruptcy without the need to worry about having your credit scrutinized is to buy a home on a Land Contract. Purchasing a home this way usually requires a small down payment. How small depends on the specific guidelines that the seller of the home has chosen. Similar to a lease or rent to own, you would make payments to the seller until it has been paid-in-full. Therefore, your contract would be between the seller and you, without a loan company involved. You can read more details about a Land Contract here

RENT TO OWN OR LEASE OPTION

Buying a home in this fashion is a great way to “test-drive” a house in order to determine if purchasing it is what you want. Some sellers require a down payment for a Lease with Option to Purchase. Others only require first month’s rent and a security deposit. With a rent to own or lease option, you are under no obligation to purchase the home, although you’re obviously showing an interest in doing so. If you decide that you don’t like the home for some reason, you do not have to purchase it. Listings for rent to own homes and lease options can be found in your local newspaper, on Craigslist, and by contacting your local real estate companies. More details about a Lease Option can be found here

Traditional Mortgage

Although most mortgage companies require that at least two years have passed after a bankruptcy before you can be approved for a mortgage, there are however, some mortgage companies that will waive this requirement, especially if you have an adequate down payment.

Even if you do have to wait the usual two year period, this waiting period will give you the opportunity to not only save up more of a down payment, but you will also have the chance to work on rebuilding your credit in order to qualify for better terms once you are able to be approved.

Cash

If you have enough cash saved up, you can pay cash for a home without the need to have your credit analyzed. By searching online, local papers and with real estate companies, you can find many homes that are either fixer-upper, foreclosures or the sellers are simply selling the homes for substantially below its market value.

Whatever the reason for being sold at a drastically reduced price, you can find yourself a terrific deal by going this route. Paying cash for a home means that you will have more money in your pocket because you’ll only have to pay for homeowners insurance and taxes, and not a house payment or mortgage.

So as you can see, going bankrupt doesn’t have to rob you of your desire to own a home, as long as you are open to alternative ways of purchasing.

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