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Bankruptcy Home Loan

By Edited Nov 24, 2016 0 0

In the past, those who had a bankruptcy were unable to get a decent mortgage. However, things have changed, as there are many lenders ready to offer mortgage loans to people who have filed bankruptcy. If you have a bankruptcy on your credit report and are looking for a mortgage loan then here are a few tips to keep in the front of your mind while looking for a bankruptcy home loan.

When you apply for a bankruptcy home loan within two years since your bankruptcy, your loan can be approved but with a higher rate of interest. If you wait for two years after your bankruptcy then you are seen as having less risk so long as you stay current with your payments. By that time you would have improved your credit score by making enough payments on time.

Upon applying for a bankruptcy home loan, the lender looks for loan to value (LTV) ratio which is obtained when you divide the loan value amount by the home value amount. The lower the LTV the higher the chance of getting approval for the loan. Normally, loans with a LTV ratio of less than 80% are approved without much trouble.

Some lenders specialize in home loans after bankruptcy; they actually provide loans to people having bad credit or bankruptcies. These lenders do not treat you as more risky then other borrowers. The best way to have the best deal in a bankruptcy home loan is to search online and compare the options available to you and your particular situation.

When one applies for a home loan, the credit is ranked from A to D. Points are lost because of late payments, bankruptcies and "over the limit" fees. One of the ways to get a better loan term or to improve credit is by having a decent job and staying employed for a good length of time. Working for a long time with the same company is treated as assign of stability and helps to increase your chances of getting approved.

If you have filed bankruptcy then you automatically do not qualify for a grade 'A' type of loan. Most people with bankruptcy need to make larger down payments. Some lenders provide Grade 'B' type loans to people with bankruptcy. Here, the requirement is to have a job for several years and to make a down payment of at least 15 percent.

People we through bankruptcy are eager to rebuild their credit using a bankruptcy home loan. Some lenders will only approve the bankruptcy home loan after two years from the date of the bankruptcy, since the time will be used to gauge the credit health of the applicant. The two year time frame is used to judge how well the person can deal with making payments on time. After that initial two year span it might be wise to refinance 1st and 2nd mortgage as it can drastically reduce your monthly payments.

Along with higher interest rates, you are also required to make a down payment of 3% to 5% of the loan amount. This can be done by borrowing money from your friend or a relative. It is better to disclose the source of the money otherwise it may create doubt and you may be treated as fraudulent. So make sure you can show where the down payment money has come from so you won't be in trouble for not reporting that money in your bankruptcy. However, I would recommend you waiting for the two years because the rate you get in two years will be significantly lower than what you will get if you acquire a loan just after filing bankruptcy.

So you may still be wondering, "Can I buy a house after bankruptcy?" Yes, you can!

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