Bankrupt. How do I prepare for the future

3 Replies

I have gone thru a recent bankruptcy and a foreclosure 2 years ago, what options do I have in getting into small duplex rental investments and working my way up to larger multi- family in the future?

What can I be doing to get prepared?

You should be able to qualify for an FHA (or FHA 203K) loan two-years after your discharge date as long as you show a solid employment history.

I agree with John, you should be good if its been 2 years since your discharge.

I know people in a similar situation and some lenders have created programs to help finance people who went through bankruptcy only 6 months ago. Granted that option you'll need 25% down. For you no need to worry, 2 years is plenty time after the fact for it not to completely prevent you from purchasing a property.

The key is to reestablish acceptable credit, without doing that your bankruptcy can be 5 years ago and you still won't qualify. 2 years is the minimum, it is not an automatic ticket to qualification.

Any lender looks to the reason for the BK, if it was due to circumstances beyond your control (medical bills, sometimes a divorce) the 2 year mark may be used.

If the BK was due to your financial mismanagement, you just bought stuff you couldn't pay for, you're looking at 3 years

A foreclosure is the kiss of death for 3 years not 2. This is for VA, FHA and conventional. The 1003 loan application used for all residential 1-4 unit properties asks the basic question "In the past 3 years have you been a party to any foreclosure or given any deed in lieu of foreclosure?"

Lenders may offer special circumstance type loans, they may use conventional guidelines but may not turn them into the secondary market, as these loans season they may later be sold in the secondary as exceptions fade away and seasoning cures the initial issues.

No one in Utah can say what will be done in underwriting a loan in Cali or Florida, it can depend on the lender and regional markets.

FHA does not make loans, they guarantee loans made by lenders under those guidelines but any lender may require additional conditions or extend requirements. While most simply do what is required to sell off the loan, there can be differences, lender to lender, region to region.

Best way to find out where you stand is to talk to your lenders, they will tell you when they will consider your application. :)

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