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Bankruptcy and Buying a Home - Types of Loans You Qualify for after a Bankruptcy
by Carrie Reeder
Bankruptcy is an unfortunate situation that affects millions of people each year. Because of the damaging effects of bankruptcy, this means of eliminating debts should be reserved as a last resort. Yet, due to an array of circumstances, bank

Bankruptcy is an unfortunate situation that affects millions of people each year. Because of the damaging effects of bankruptcy, this means of eliminating debts should be reserved as a last resort. Yet, due to an array of circumstances, bankruptcy is the only alternative to relieve financial hardships. After a bankruptcy, many homeowners attempt to rebuild their credit by purchasing a home. While possible, there are certain limitations.

Qualifying for a Home Loan after Bankruptcy

Following a bankruptcy, many people choose not to finance large purchases such as a home or automobile. Several lenders will approve a loan application. Regrettably, these loans come with a huge price. After a recent discharge, auto loans may include interest rates up to 18%, whereas interest rates for homes may be several percentage points higher than the market average. In either case, you can expect much higher monthly payments, which limits your spending power.

In contrast, buying a home following a bankruptcy is one of the easiest methods to quickly re-establish credit. Hence, if you have the funds for a large mortgage payment, it doesnt hurt to explore your options.

Which Home Loan to Choose Following a Bankruptcy?

Even though it is realistic to purchase a home immediately following a bankruptcy, the financing options are restrictive. For the most part, homeowners with good credit opt for FHA or conventional mortgage loans. These particular loans offer reasonable terms and services. Moreover, there are various loan programs to match different needs.

Unfortunately, if you have bad credit, qualifying for either of these loans immediately following a discharge is not possible. In both cases, those with past bankruptcies are subjected to a waiting period. For a FHA loan, you are required to wait at least 24 months before applying for a loan. With conventional loans, the wait period is four-years. This rule was established in order to encourage credit repair before purchasing a home.

Getting Approved for a Mortgage Loan

Homebuyers who are unwilling to delay purchasing a home may obtain a mortgage through a sub prime mortgage lender. Sub prime lenders approve loans to people one day following a bankruptcy. Furthermore, these lenders offer a range of mortgage to assist those who require down payment and closing costs assistance. Although the rates on sub prime loans are slightly higher, these lender do not take advantage of people by charging over-the-top mortgage rates.

Visit to find a list of reputable online lenders for a sub prime mortgage loan.

View our recommended lenders for buying a home after bankruptcy.

Also, check out our recommended sources for a 3 bureau credit report.

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