Years ago, people who had a bankruptcy on their credit report were unable to get a decent mortgage, if they were able to get approved for a mortgage at all. However, today, the rules have changed. More and more lenders are offering mortgage loans to people who’ve filed bankruptcy. If you have a bankruptcy on your credit report, and you’re looking to get a mortgage loan, read this article to find out three things you need to know about getting a home loan after bankruptcy.
Waiting Two Years Earns You Better Interest Rates
If you need to apply for a mortgage earlier than two years after the date that
your bankruptcy went through, you’ll likely get approved; however, your interest
rates will be a lot higher than they would be if you wait two years. After two
years, most lenders will see you as less of a risk, and you will qualify for
much better mortgage terms.
A Bigger Down Payment Makes You a More Qualified Borrower
When you apply for a mortgage loan, your lender looks at something called your
LTV ratio. LTV is the amount of money you are borrowing divided by the value of
your home. For example, if your home is worth $100,000, and you are borrowing
$90,000, then your LTV is 90%. 100% LTV’s are generally reserved for borrowers
with near-perfect credit. However, the lower your LTV is, the more likely you
will get approved for your mortgage. Most lenders rarely decline loans with an
LTV at or lower than 80%.
Some Lenders Specialize In After-Bankruptcy Mortgages
Some lenders specialize in loaning to people with either bad credit or past
bankruptcies. These lenders will not view you as more of a risk than their other
borrowers because all of their borrowers are in the same situation as you are.
Your best bet is to shop online and compare interest rates and terms between
different lenders. This way you can be sure that you are getting the best deal.
To see a list of recommended lenders for
home loans or
after bankruptcy lenders online, visit ABC Loan Guide.