If I am contemplating bancruptcy and have a credit score of approx. 525, will someone still do a mortgage loan

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I have had a perfect credit score until recently; it seemed that everything that could go wrong did go wrong. My husband was medically retired from the Marine Corps due to spine surgery, and thinking that the cost of living would be cheaper, and having promises of job opportunities, we moved across the US. We bought a home that ended up being worst than the Tom Hanks film “Money Pit” and after sinking over $ 70,000 into it (and sadly it STILL needed more) as well as paying over $ 1,000 a month in electric (despite the fact we lived in only two rooms because it was under construction) when neither of us, with college degrees, could find a job paying more than minimum the house was forclosed.

We are now bringing in over $ 4,000 a month. We have approximately $ 3-5,000 we can put down on a home- the home we are looking at is $ 130,000. Does anyone know of any lenders that still may consider us? And what if we are wanting to file bancruptcy? Will that help or assist in getting a loan?

  1. Reply
    George P
    May 4, 2011 at 12:36 am

    I believe if you file bankruptcy, that is a negative on your credit score, meaning, your score will go even lower, and banks don’t like seeing that on a credit report. It will hurt you for the next 7 years, I belive is the limit on that.
    You would be better off selling the money pit house, and get what you can out of it, and try to recover that way.

  2. Reply
    May 4, 2011 at 1:32 am

    I can relate to your situation. I too had perfect credit once upon a time. My wife and I ended up declaring bankruptcy before the laws changed. Now I don’t think you can file chapter 7 as we did. I think you can only file chapter 13 and attempt to repay your outstanding debts. I not quite sure how that would help with getting a loan. I think you need some legal advice. If you have any lawyer friends familiar with that you might ask them what you should do. I think you would do better to try to pay down debt as much as you can and rebuild your credit score. If you do go with bankruptcy, it will take a long time to rebuild that credit and it will stay on your for 10 yrs. or more.

  3. Reply
    Diane A
    May 4, 2011 at 2:25 am

    Any lender at this point that will consider you (if they will will with such a small down & a horrible FICO) will charge a huge interest–not worth it–you will just sink lower. You should probably consult with one of those people that specialize in financial planning /life style planning (the ones that structure your debt, tell you what to spend $ on etc–whatever they are called). I think you need more advice than YA can give you. Good luck.

  4. Reply
    May 4, 2011 at 2:29 am

    I am sorry to hear of your troubles. The hard facts are that the credit issues that put you near bankruptcy are most likely current, so you would not qualify. You need to show at minimum to negative credit for the previous 12 months, and if you file bankruptcy, you will need to have two years beyond the bankruptcy to be considered.

    And NEVER give your info out to anyone on a message board like this who claims they can help you. That is fraud detection 101.

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