Getting a Mortgage After Bankruptcy
So, you've actually decided to take the plunge? Here's more good news. There are literally thousands of "alternative" lending sources in America. Also know as "B-C-D" lenders, these lenders provide mortgage financing for folks who can't qualify for conventional mortgages. The catch? Be prepared to pay through the nose - high rates and high fees.
The impact of bankruptcy directly affects your credit score. Most lenders use your credit score as their primary way for evaluating the level of risk you pose to them. With a bankruptcy behind you, your credit history suggests that you are a high risk to the lender. The lender will be compensated for absorbing this risk by charging you higher rates and higher fees.
The other thing to keep in mind is that alternative mortgage programs have very specific underwriting criteria. What does that mean? Well, the underwriting criteria are the basis on which loans will be given. As a result, your loan will either be approved or rejected because you loan application did or did not fit the program requirements.
If you dont fit the requirements for one lender, do continue to check with others. For example, one loan program may require at least 20 percent down, credit scores of 580 or more, and no late payments on your rental history for the last 12 months. Another loan program may have the same requirements, but will allow a credit score to 560. Think of each loan program as a mold. Your loan application must fit into that mold for it to be approved. If one mold isnt for you, find one that is!
So, having said that, the best way to determine whether or not you are eligible for mortgage financing is to consult with a good mortgage broker who is experienced in mortgage after bankruptcy. A mortgage broker can collect your data, check out your financial situation and then shop around for alternative programs that will accept your application.
One point of interest to keep in mind: A person in a Chapter 13 bankruptcy who is meeting the terms of repayment will have an easier time re-establishing credit than someone who discharged debts in a Chapter 7 bankruptcy.