Owning your home is part of the American dream. It is usually the goal of the post-bankruptcy debtor just as much as the rest of America. But is owning your home affordable and desirable after bankruptcy?
Things debtors should consider before signing a mortgage:
- Can you afford to own your own home? Yes, your debts will be reduce after bankruptcy; but is your income adequate for homeownership? Conventional wisdom says that you should not spend more than 30 percent of your income on housing. What is 30 percent of your income? Can you afford a home on 30 percent of your income?
- What are the true costs of owning a home? Many post-bankruptcy debtors only look at their mortgage payment when comparing the cost of owning to the cost of renting. But when you’re thinking of buying a home after bankruptcy, you need to include the cost of insurance, taxes and repairs in your housing costs. Remember, renters don’t pay for any of those expenses.
- Will owning a home prohibit you from saving for retirement? If you’re like most bankruptcy debtors, you’ve exhausted your retirement savings before filing for bankruptcy. Well, you will need to invest in retirement regardless if you want to have a comfortable post-work life. But sometimes homeowners are spending so much money on their housing costs that they are forced to neglect their retirement savings. Don’t let your post-bankruptcy dreams of homeownership derail your retirement planning.
- Will you be able to pay off your mortgage within a reasonable timeframe? Just like any debt after bankruptcy, it is in your best interest to have a concrete plan to pay off your mortgage. Before signing your name to a new mortgage, make sure that you will be able to actually own that home mortgage-free one day.