After a bankruptcy, you can get approved for a home loan. Just be
prepared to pay several points above conventional rates. However, if you
have a large down payment or wait two years, your mortgage rates will
improve to near conventional rates.
Dealing With A Past Bankruptcy On Your Credit Report
A bankruptcy will stay on your credit report for seven to ten years.
However, it stops affecting your credit significantly after two years. So
if you have established other good credit habits, you can qualify for
market rates in no time.
But before you shrug off your bankruptcy, check your credit report to
be sure that all accounts that were part of your bankruptcy are
discharged. Its not uncommon for paperwork to not get processed, leaving a
negative mark on your report.
Other Helpful Factors
A down payment of 20% is expected for conventional rates with a
traditional loan. Anything less and you will have to either pay a point or
more at closing or additional loan interest. The same is true with sub
prime loans. However, larger down payments decrease your rates.
Significant cash reserves and a large income can also offset your
credit risk. The amount you want to borrow is also a factor. The lower your
debt to income ratio, the better score you will get.
Its also important to remember that not all lenders will treat your
application the same. So its important to shop around for the right
mortgage with the right terms.
Shopping Mortgage Lenders
If it has been less than two years after your bankruptcy or you know
you have poor credit, start shopping with a sub prime lender. They deal
primarily with people who have adverse credit. They can also offer you a
lot more options than a traditional lender.
For instance, sub prime lenders have easier terms to qualify for a zero
down mortgage. You can also opt for a future refinance with your
mortgage when your credit score improves.
Remember that you have many financing options for a mortgage, even with
a bankruptcy in your past.
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