How to Get a Mortgage Loan after Bankruptcy
Just because you have experienced a bankruptcy in the past does not
always mean that you cannot qualify for a mortgage loan. The secret is being
patient and making sure that you provide the documentation necessary in
order to encourage a bank to provide you with a loan.
The first step is to understand that it is possible for you to get a
mortgage loan after bankruptcy. Many people make the mistake of simply
assuming that because they have had a bankruptcy that no one will be
willing to loan them money to buy a home. As a result, many people just
never make any attempt to obtain a mortgage because they just naturally
assume that they will be turned down. That is not necessarily the case,
provided that you are willing to do the work to demonstrate that you can
handle a home loan.
Once you have moved past that mental roadblock, the next step is to make
certain you are aware of and follow all conditions relating to your
bankruptcy. Be certain that you make your payments in full and on time.
Missing even one payment could spell disaster, so make sure that you are
dedicated when it comes to making your payments on time.
During your bankruptcy, be sure that your time is well spent. In many
instances, you may be able to qualify for a mortgage loan following one year
of bankruptcy, if you filed Chapter 13. If you filed for another form of
bankruptcy it could take two years to qualify for a mortgage. During
that period, use your time wisely and be sure that you are paying your
bills on time in order to repair your credit. One way that you can boost
your credit is to use a secured credit card. Make sure that you use it
only occasionally and pay it off in full on time. This can make a huge
impact toward restoring your credit and eventually qualifying for a
mortgage. Your goal is to work toward reaching a credit score of at
least 650, preferably even higher. (Read
The Effects of Bankruptcy to Your Credit Rating
here).
It is also important that you can demonstrate a regular
income. Remember that lenders not only look at your credit score, they
will also want to ensure that you have a regular income. Make sure that
you can document six months of pay stubs as well as six months of
bank statements and a full two years worth of tax returns.
This is also a good time to begin
saving for your down payment. When you
have had a bankruptcy, you should expect to pay a higher down payment.
The more you can pay down on your mortgage the better, so try to aim for
a minimum down payment of 20%. A down payment of 20% will allow you to
avoid private mortgage insurance (PMI). If you absolutely cannot come up with
20% then shoot for 10% in order to have the best chances.
Buying a foreclosed home could be a benefit to you in this instance. The
number of foreclosures is on the rise and can provide you with the
opportunity to save quite a bit of money, which can be handy when you
need to come up with a larger down payment.
A
FHA loan could be advantageous as well because it will allow you to
purchase a home with a down payment of less than 3.5%. This is probably
the only exception where you could purchase a home with a down payment
of less than at least 10% while in bankruptcy. Also, FHA tends to be
flexible when it comes to bankruptcy. That does not necessarily mean
that you are a shoo in for a mortgage, but it can definitely be
comforting to know that you will not be immediately turned down. If you
have taken the time to build your credit and you are able to demonstrate
a regular income, then the chances of receiving an approval on a
mortgage through FHA could actually be fairly good even if you have had
a bankruptcy in the past.
Remember that even though you may have
filed for bankruptcy, there is definitely still hope if you are interested in buying a home. You may
need to exercise some patience, as the process could take some time, but
with the right attitude and the willingness to work at it, it is
possible to get a mortgage after bankruptcy and buy the home you've always
dreamed of.
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