Home Mortgage Loans After Bankruptcy - Financing A Home After Bankruptcy

Financing a Home After Bankruptcy: A Strategic Approach

Securing a mortgage after bankruptcy can be manageable with the right approach. By understanding your options and improving your loan application, you can achieve competitive rates and favourable terms.

Lenders for Post-Bankruptcy Financing

- Subprime Lenders: Immediately following your bankruptcy discharge, subprime lenders can provide financing, though rates may be significantly higher—often around 12% above conventional rates—unless you have substantial cash assets.

- Conventional Lenders: After two years, you may qualify for conventional mortgage rates. Although the bankruptcy will remain on your credit report for several years, lenders will focus more on your current payment history and debt-to-income ratio.

Improving Your Loan Application

1. Down Payments: Offering a down payment of 20% to 50% can make you eligible for lower rates.

2. Cash Reserves: Having reserves for at least two months will strengthen your application.

3. Adjustable Rate Mortgages (ARMs): Opting for an ARM can provide temporarily lower rates and higher borrowing potential.

4. Loan Term: Choosing a shorter loan term can also lower your rates.

5. Buying Down Your Rate: You might also consider purchasing points to reduce your rate, though increasing your down payment and refinancing later might be more beneficial.

Research and Compare Lenders

- Loan Estimates: Compare loan estimates from different lenders to ensure you’re getting the best deal. Use consistent numbers and terms for accurate comparisons.

- Application Process: Once you’ve selected a lender, completing the loan application online takes just minutes. Your loan contract will be available for review within days, followed by the disbursement of funds.

By carefully selecting lenders, improving your financial standing, and thoroughly researching your options, you can successfully finance a home even after a bankruptcy.