Chapter 7 Discharged

I was recently discharged from a chapter 7. What do I need to do to purchase a home?

Because mortgage companies have tightened their lending practices, anyone who has filed a Chapter 7 must wait 2 years from the date of discharge to purchase a home. If a foreclosure is involved, the wait is 3 years from the date of your foreclosure. You are in a position to start your financial life over. Hopefully, you learned some valuable lessons to prevent this from happening again. Below is a guide to get you back in the black with your finances.

1. Get a copy of your credit report.

2. Go over your credit report with someone who can help you. There are many free credit counseling services. If you opt to go with a credit counselor that charges a fee, make certain you know exactly what you’re getting. You want someone who can decipher your credit report and counsel you on what you need to do to achieve a credit score of 720 or above. If you don’t want to go with a credit counselor, make an appt with someone who actually does mortgage loans. They can tell you exactly how to improve your credit score to purchase a home.

Free Credit Reporting Agencies

GreenPath
www.greenpath.com

Consumer Credit Counseling Service
www.cccsatl.org

Money Management International
www.moneymanagement.org

3. Live within a budget. Write down all your monthly bills. Don’t forget to include
payments that occur quarterly or yearly, like insurance, professional dues, doctor visits, or car repairs. If you’re bringing in less than what you are earning – there’s a problem. You must reduce your debts or increase your income. People waste lots of money on foolish things they don’t need, want or use. Living within a budget allows you to see where your money is going.

4. Save. Save. Save. Save. Save. Save. Saving must be done automatically to be effective. Your finances should be set up so that money automatically and consistently goes into a savings account every month without you having to think about or physically do it. That’s the only way you’re going to be able to save. Start small, less than $50 per month; once you get accustomed to that, increase it to $100 per month. Keep your savings affordable enough so you’re not constantly taking money out for everyday expenses. The rule of thumb is to save three to eight months of living expenses. Saving must become a habit. If you learn nothing else from this article, always remember saving must be habitual.

5. Start rebuilding good credit – this means paying every single creditor on time or before time. You cannot afford to be late on anything. Everything must be paid on time. No more paying bills late.

6. Sign up for a credit card with your banking institution. You may be only eligible for a secured credit card, meaning you may have to put up the money for the card. You can get a secured card by paying as little as $300 – which gives you $300 worth of credit. Soon, that card will become like a real credit card. Make small charges like auto fuel, and pay the bill off at the end of every month. This shows that you have learned to live within your means. It’s OK to have a small running balance, but don’t let it get out of hand. Be disciplined.

7. Pay your rent with a check, or through on-line banking. No more paying rent with money orders or cash. Paying on-line or by check shows a paper trail; which is documented proof of when your rent is paid? Make sure your landlord gets her rent on the first of every month. This is your most impressive way of showing a lender that you are deserving of a mortgage loan.

8. The bottom line is you must prove to a lender that you have the ability to consistently live within your means, save, and pay all bills on time, every single month