Carrie Reeder asked:




Purchasing a home after a recent bankruptcy is not impossible. Although most lenders recommend that you wait at least 24 months before applying for a mortgage, there are ways to obtain a mortgage loan sooner. Lenders are generally willing to approve recent bankrupt individuals for a home loan. The home or property serves as the collateral. Thus, if you default on the mortgage, the lender forecloses on the property. Moreover, obtaining a mortgage loan is a perfect way to re-establish credit. Here are a few tips for improving your chances of obtaining a home mortgage after bankruptcy.

Establish New Lines of Credit

It is not mandatory that individuals with a recent bankruptcy wait 24 months before purchasing a new home. However, waiting has its advantages. After a bankruptcy is discharged, you need to begin rebuilding your credit. This is accomplished by opening new lines of credit. Applying for a credit card is the easiest and the quickest way to improve credit history. Initially, you may have to obtain a secured credit card. However, once your credit rating improves, you will begin to receive offers for unsecured credit cards. Ideally, you should open at least three new credit accounts. Maintain low balances. Avoid late payments. If possible, try and pay off balances each month.

Monitor Credit Reports

Once you have begun to re-establish your credit history, start a routine of regularly checking your credit report for errors or inaccuracies. Get involve with a credit report monitoring agency. These agencies are effective because any suspicious or unusual account activity will be brought to your attention. Moreover, the agency will contact you if a new account is opened in your name. If errors appear on your credit report, contact the credit report bureau to file a dispute, and the creditor to resolve the issue.

Have a Down Payment

Waiting 24 months after a discharge to purchase a home is advantageous because you are able to obtain a mortgage with 100% financing and little money down. If you are eager to purchase a home soon after a discharge, you must have a down payment. Moreover, your credit history since the bankruptcy has to be blemished-free. Late payments or missed payments may disqualify you from obtaining a mortgage loan.

Dolores

Carrie Reeder asked:




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. It’s 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.

It’s also important to remember that not all lenders will treat your
application the same. So it’s 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.

Judy