Buying A Home After Bankruptcy
REM #A675
By Ilyce R. Glink
Summary: A reader has recovered from bankruptcy 9 years ago but is wondering whether a "no doc" loan may be for them. Ilyce explains what a "no doc" loan is and why it is not necessary if you have a good credit score.
Q: What is a “no doc” loan. Are they legitimate loans?
Also, I filed for bankruptcy due to a divorce more than 9 years ago. Next July, I’ll be at the 10-year anniversary of the bankruptcy. At that time, the bankruptcy should fall off my credit report. Should I wait until then to buy a house or would I get the same credit if I apply now?
I have worked hard to rebuild my credit history and my credit score is currently 730.
A: Let’s start at the top: A no doc loan simply means that the lender doesn't require documents from you to verify certain information, like your income, place of employment, or other information that you’ve put on your application. These are legitimate loans, offered by some of the biggest lenders around. They’re also offered by predatory lenders, so be careful.
Typically you'll pay a quarter of a point more in interest rate for one of
these loans. So if a conventional loan is being offered at 6.5 percent, you
might pay 6.75 percent for a “no doc” loan.
But with a credit score of 730, you shouldn't need a “no doc” loan.
You've obviously done a great job of rebuilding your financial life after your
bankruptcy 9 years ago. You've got new lines of credit and are making your payments
on time and, I'd guess, in full.
While your credit score may go up a bit more as your bankruptcy falls off your
credit report, it clearly isn't having much of an effect on the score itself.
In fact, people in the credit reporting industry tell me that after about four
years, a bankruptcy no longer plays a huge role in your credit history or your
credit score.
So go ahead and buy your house now. Take advantage of today's low rates. And,
congratulations on keeping your financial nose clean.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.
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