How can bankruptcy affect your home loan application?
What is bankruptcy?
Bankruptcy is simple. It is a legal process that occurs when you can no longer service your debts, providing you an avenue in which to clear many of these debts and allow yourself to start again in your financial life. Bankruptcy is certainly not something anyone wants to experience, as it results in serious restrictions on you as an individual (your ability to get credit and travel overseas being the most significant), but should at least be viewed as a ‘second chance’ of sorts for people, and is not synonymous with destitution but financial possibilities.
Bankruptcy typically lasts 3 years, and during this time a trustee is appointed to you to monitor your financial position.
Buying a home after bankruptcy
Because bankruptcy affects your ability to access credit, it also makes it very difficult to secure a home loan. Most lenders will not provide loans to those who are still in bankruptcy.
It is for this reason that, unfortunately, view.com.au Home Loans cannot provide users who have recently experienced bankruptcy with home loan quotes, as their suitability for a loan by view.com.au partner loan providers cannot be assured.
The good news is that those who have declared bankruptcy (those in a debtor’s petition) or those who have had bankruptcy declared on them (those in a creditor’s petition) can eventually find financing, especially after the three-year lifespan on bankruptcy.
The best way to secure financing after having declared bankruptcy is to:
Clear your debts and find steady employment.
Turn your financial position cash-positive.
Save a deposit for home (20 percent is best and often necessary for financing if you have declared bankruptcy in the past).
Check your credit report, and make sure it is accurate