HELPING GOOD PEOPLE THROUGH HARD TIMES
While most people promise themselves that they will never again have or use a credit card, some people consider keeping at least one of their old cards for convenience or emergencies after their bankruptcy is over. In fact, most of the time all credit cards are cancelled by creditors when a case is filed. Additionally, there is usually no reason for you to retain any of your old credit cards after a bankruptcy.
Don't be surprised to receive unsolicited credit cards soon after your case is over. At that stage you are a better credit risk. Also, you cannot file against newly issued credit cards for a few years. For most people, bankruptcy makes it easier, not harder, to get new credit cards.
As soon as you receive your bankruptcy discharge, you will be able to qualify for some consumer loans, although at higher interest rates. Generally, it takes no more than two years to reestablish a normal credit rating provided you pay debts currently and make sufficient income. Within two years after receiving a Chapter 7 discharge, most people are able to purchase cars and homes with normal interest rates and terms.
At one time bankruptcy destroyed peoples' credit. Banks used to believe personal bankruptcy was a stigma on credit that you could not overcome. Today, so many people file bankruptcy every year (About one million a year) that banks cannot ignore this large market of potential customers. As a result, banks are much more lenient toward people forced into bankruptcy. While no one plans to file bankruptcy, the effect of filing today is not nearly as bad as your creditors would like you to believe.
Credit Life Insurance?If you are about to buy a house, or even a car, you will often be offered credit life insurance? Generally I would say don't buy it.
What is credit life insurance? This is an insurance policy that pays the debt off when you die. The premium is a level payment that is added to your payment every month.
Here’s the problem with it; when you pay on a debt like a mortgage or car loan regularly the balance goes down a little every month. Eventually the loan gets paid off. But the amount you pay every month for that insurance does not go down. So the benefit you are paying for goes down as time goes by.
In contrast, a term life insurance policy has a level benefit amount. The cost of some term policies do go up over time, but not dramatically. Life insurance policies with an accumulated cash value have the added benefit of a forced savings within them. While they may be a bit more expensive, the monthly cost does not vary as long as the policy payments are current and at some point the policy is paid off, meaning no monthly payments.
Veteran Help
The Home Loan Regular Refinance Program
You can refinance your current loan, whether it's a VA-guaranteed mortgage or not.
Usually, the new loan is limited to 90% of the appraised value of the house. There are a few exceptions.
General Program Requirements
Persons who may qualify for these refinancing loans include:
Veterans (including Reserve and National Guard members who were called to active duty)
Active duty servicemembers
Current Reserve and Guard members (usually after 6 years of reserve service)
Certain surviving spouses
Commissioned Officers of the Public Health Service and National Oceanic and Atmospheric Administration are considered to be active duty members and veterans, once discharged.
Home Construction Loan
This helps the veteran obtain a no-down payment mortgage at a competitive interest rate. VA guarantees a percentage of the loan.
General Program Requirements
Persons who may qualify for VA guaranteed loans include:
Veterans (including Reserve and National Guard members who were called to active duty)
Active duty servicemembers
Current Reserve and Guard members (usually after 6 years of reserve service)
Certain surviving spouses (Note: A surviving spouse who remarries on or after attaining age 57, and on or after December 16, 2003, may be eligible for the home loan benefit.)
Commissioned Officers of the Public Health Service and National Oceanic and Atmospheric Administration are considered to be active duty members and veterans, once discharged.
VA Guaranty Program
VA loan guaranties are made to servicemembers, veterans, reservists and certain qualifying unmarried surviving spouses for the refinancing of a VA home loan.
General Program Requirements
You must have a current VA loan to be able to utilize the Interest Rate Reduction Refinancing Loan (IRRRL) program.
Loan Terms
The interest rate varies and the length of the loan cannot exceed 360 months. Payments are due monthly. No more than 2 points may be rolled into this loan plus allowable closing costs.
The Native American Direct Loan Program
The Native American Direct Loan Program makes home loans available to eligible Native American veterans who wish to purchase, construct, or improve a home on Federal trust land.
The home must be your primary residence.
(It is also possible to use the program to re-finance an existing Native American Direct Loan).
General Program Requirements
This program is designed specifically for Native Americans who want to purchase, build, or improve a home on Federal Trust Land.
Native Americans who may qualify for these loans include—
Veterans (including Reserve and National Guard members who were called to active duty)
Active duty servicemembers
Current Reserve and Guard members (after 6 years of service)
Loan Terms
The interest rate is set by VA. The length of the loan is usually 30 years with payments due monthly. The length of the loan is usually 30 years with payments due monthly.
There must be a Memorandum Of Understanding (MOU) between the tribe and VA. The veteran or the veteran's spouse must be recognized as a Native American subject to the jurisdiction of the tribe, which controls the land. Also, the tribe must be Federally recognized, and the home must be on Federal trust land.
Interest Rate Reduction Refinancing Loans (IRRRLs) may only be done if the prior loan was a NADL and there is at least 1% difference in the existing loan rate and IRRRL rate.
Home Purchases
VA loan guarantees are made for the purchase of homes, condominiums and manufactured homes (when they're classified as real estate).
VA guarantees a percentage of the loan. This helps the veteran obtain a no-down payment mortgage at a competitive interest rate.
General Program Requirements
Persons who may qualify for VA guaranteed loans include:
Veterans (including Reserve and National Guard members who were called to active duty)
Active duty servicemembers
Current Reserve and Guard members (usually after 6 years of reserve service)
Certain surviving spouses
Loan Terms
Market Interest Rate, VA funding fee and no pre-payment penalties. Maximum loan term cannot exceed 30 years. No maximum loan amount; monthly payment frequency.
Home Loan Interest Rate Reduction Refinancing
VA loan guaranties are made to servicemembers, veterans, reservists and certain qualifying unmarried surviving spouses for the refinancing of a VA home loan.
General Program Requirements
You must have a current VA loan to be able to utilize the Interest Rate Reduction Refinancing Loan (IRRRL) program.
Loan Terms
The interest rate varies and the length of the loan cannot exceed 360 months. Payments are due monthly. No more than 2 points may be rolled into this loan plus allowable closing costs.
Buying a Home
You can qualify for a home loan once your bankruptcy has been discharged for at least two years.
If you do want to apply for a home loan there are several things you can do to ensure that you are able to get your financing at the best interest rate possible.
1) Rebuild your Credit History - If you are trying to re-establish your credit after bankruptcy the best place to start is with a secured credit card. They have the lowest overall fees and interest, and you get your initial deposit back when the card converts to an unsecured credit card.
2) You need to have a spotless or nearly spotless payment history after your bankruptcy. If you want to show lenders that you can handle regular payments, you need to have a couple of years worth of on-time payments showing up on your credit reports.
3) You need a steady, predictable income that can be verified - Your credit report is not the only thing lenders look at when they make a decision about you. How much money you make regularly is just as important as your past credit history. You will have to be able to show proof of a regular income via paycheck stubs, bank statements and tax returns.
4) You need a down payment that is as large as possible.
5) Consider Getting an FHA or a VA loan - These types of loans will allow you to qualify with as little as 3% down, and their lending policies are much more forgiving.
FHA Loans - The Federal Housing Administration can insure your loan. Since the FHA is a government body it makes your application look at lot more attractive to lenders since the government is basically backing your loan. You can find our more about FHA Loans as well as whether or not you qualify here.
VA Loans - Veterans may qualify for assistance with VA loans.
6) If you need down payment assistance you can check out programs like Nehemiahor Neighborhood Gold.
The Nehemiah Corporation is the largest privately funded mortgage assistance program in the US. They have a free pre-home ownership education course that you can go through as well.
Neighborhood Gold is a non-profit program that assists people who qualify for an FHA loan to qualify for a mortgage with no down payment or closing costs.
7) Don't forget to plan for the closing costs, taxes, home owner's insurance, and regular maintenance you will need to do on your home.
8) Check your credit report before you approach a lender - Depending on your credit score (which you can access through MyFICO.com) you will either want to apply for a home loan through a regular lender, or a sub-prime lender. If your credit score has not recovered from your bankruptcy (650 or below) you may not be able to get a home loan, and you will certainly have to visit a sub-prime lender if you do. However if your credit score is near or over 700 then you will be in good shape to visit a regular lender.
9) Consider buying a foreclosed home - If you purchase a foreclosed home you can usually get a beautiful home at a fraction of the normal price.