Buying A Home After A Bankruptcy

Since the “great recession” of 2007-2008, a considerable number of bankruptcies in Illinois have been filed by homeowners. “Upside-down” home loans are a top cause of bankruptcy, but other homeowners with more reasonable loans lost their jobs in the recession. Still others became ill or injured and unable to work. If you are falling behind on mortgage payments in the Chicago area, and you cannot see a way out, bankruptcy may or may not be the solution, but you should immediately consult with a Chicago-based Illinois bankruptcy lawyer. After a bankruptcy, many people need or want another home – often a smaller or less expensive home – but they need to borrow. If this describes you, consider an FHA (Federal Housing Administration) loan.

FHA loans are easier to obtain than conventional loans. They’re private loans, but they are backed by the government. Once you qualify, the loan is made by a private entity and guaranteed (meaning insured) by the FHA. In turn, the FHA charges both an up-front premium as well as an annual premium paid by the borrower. An FHA loan can be arranged with as little as 3.5 percent down, and you don’t need perfect credit, either. With a credit score as low as 580, a borrower can put only 3.5 percent down on the purchase of a home and qualify for a mortgage. If your credit score is below 580, you can still obtain financing if you are willing to put down about 10 percent.

An FHA loan is a good option for those who’ve filed bankruptcy or been subjected to foreclosure in the past few years. Borrowers still need to re-establish their credit and meet other FHA requirements first. However, if you’re currently facing foreclosure, struggling with your mortgage, or sinking under a pile of other debts, the first thing to do is to consult at once with an experienced, Chicago-based Illinois bankruptcy lawyer. If you’re in financial trouble, make the call today.