Getting A Mortgage Loan After Bankruptcy

Buying a home after bankruptcy is possible, but the buyer needs to be patient, and wait at least two years after discharge or dismissal of the bankruptcy before applying for a home loan unless he is prepared to pay fifteen or twenty percent down in cash. Also, the interest rate will be much higher if the buyer gets in a hurry. While bankruptcy has a serious effect on one's credit rating, the damage can be repaired. The first thing to do is accumulate three or more high-quality credit references. Once a line of credit has been acquired with banks or credit card companies, and then you need to establish a perfect payment history with them, and keep the charges from getting too high. A debtor should ask each of those companies to agree in advance to give a clean credit letter after he has paid on time for twelve months. Also, he should get letters from utilities providers, his auto insurance provider, and phone service provider. All of this will help in getting a mortgage after bankruptcy.

Having a job is essential to getting a mortgage loan after bankruptcy, and preferably holding down the same job for those years since bankruptcy. Having sufficient income to make the house notes and cover your other expenses is a necessity, and if you've managed to same money for a down payment, that's another point in the buyer's favor. If he hasn't owned a home before, a buyer may find he has an excellent resource in his state's "first time home buyer" program. Many states have such programs, but they don't advertise them, so a little investigative work is involved on the part of the prospective homebuyer. Buying a home after bankruptcy takes effort, but it's worth it.

If the loan applicant hasn't saved the money in a savings account, he may need to find another source for the down payment money. Sometimes a relative will help out with this, and after the loan is approved and the money accepted, a second mortgage can be taken out to repay the relative. The source of the down payment loan must be reported to the mortgage company, however, so you won't be charged with fraud. There are still other sources of money for down payment when buying a home after bankruptcy, and the buyer should check these out before applying for the home loan. There are grant programs available in most states that don't have to be paid back, so he should check out "down payment assistance" on the Internet. There are a couple of programs that allow the seller to assist a buyer, such as Neighborhood Gold or the Nehemiah program. These are the only legal ways a seller is allowed to help the seller to help a buyer.

Even though a bankruptcy stays on one's credit report for ten years after discharge, there are many more lenders who are willing to work with buyers who are getting a mortgage loan after bankruptcy today than in years past. There are Internet sites that will assist in getting a mortgage loan after bankruptcy. One thing the borrower needs to be aware of when buying a home after bankruptcy is the presence of subprime lenders who will take advantage of borrowers with problem credit histories. Typically, they charge excessive upfront processing fees and prepayment penalties. The only fee you should have to pay is an application fee to cover the cost to the lender of pulling your credit application.

It is always to a borrower's advantage, whether getting a mortgage loan after bankruptcy or applying with a stellar credit history, to get quotes from three or four mortgage companies. If a buyer accepts the first mortgage loan offer, he may end up paying a higher interest rate than he needs to pay. Another place where the buyer can be taken advantage of is in the closing costs, so it is important to get those in writing. With that document in hand, applicant getting a mortgage loan after bankruptcy can then go online to see if they are within normal limits. If they are not, he can refuse to go through with the loan unless they are reduced. The point is, just because a person is buying a home after bankruptcy, unscrupulous lenders shouldn't punish him further. The whole idea of bankruptcy is to give a debtor the chance for a new start, and "forgive" his past financial transgressions. Especially for Christians, this is a very important principle. "To open their eyes, and to turn them from darkness to light, and from the power of Satan unto God, that they may receive forgiveness of sins, and inheritance among them which are sanctified by faith that is in me."(Acts 26:18)

Credit history, and the presence of a bankruptcy in that credit history, is important to a lender when considering a prospective borrower, but it isn't the only thing a lender is going to look at. The reasons for the bankruptcy may have an influence in the overall picture. If the bankruptcy was the result of circumstances beyond the control of the bankrupt person, such as illness, loss of employment, or accident, then the good credit and job history prior to bankruptcy will weigh more toward acceptance. If, on the other hand, bankruptcy was the result of poor financial planning, the prospective borrower will have to show reform. Hence, the two-year waiting period mentioned above.

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