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Monday, November 28, 2016

Obtaining a Mortgage Post Bankruptcy

Getting a Mortgage After Bankruptcy

Buying a house after a bankruptcy takes a little research to find a bad credit mortgage with reasonable rates and terms. But it can be done with the help of online lenders. By comparing financing offers, you can quickly find a home loan with good terms. As a general rule, the longer you wait after your bankruptcy is over, the better chance you will increase your score, and have better success. A benchmark is about two years after discharge.

Finding The Right Mortgage

With a credit score less than 650, you will need to apply for sub-prime financing with rates slightly higher than conventional home loans. Sub-prime financing is offered by traditional lenders, as well as specialized bad credit lenders. To get the most borrowing power, choose an adjustable rate or interest only mortgage. To further reduce your rates, plan on a down payment of 20% or more. Large cash reserves or a low debt ratio will also help you qualify for lower rates. But researching lenders is the surest way to find the lowest rates. Remember too that with sub-prime lending, you don’t pay for private mortgage insurance, even with less than 20% equity.

Before You Start Your Search

Before you start your sub-prime mortgage search, get a copy of your credit report. Check it for accuracy after your bankruptcy, and then use it to get loan quotes. That way lenders won’t have to access your report and further lower your credit score with unnecessary credit inquires. Each time a credit report is ordered it will impact your score, unless they do a “soft pull.”

Securing Mortgage Terms For The Future

When you start comparing mortgage offers, make sure the terms are favorable for your future financial goals. If you plan to refinance when your credit score improves, makes sure there aren’t any fees for early payment. This is also a benefit if you move before the loan is paid off. Another important factor to consider are closing costs, especially if you are planning a future refinance. Paying extra thousands for a slightly lower rate doesn’t make sense if you don’t keep the loan for seven years or more. Even with the lower interest charges, you won’t see a savings. So take a look at the APR for a general idea of the total loan costs. But then look at the breakdown of the closing costs and interest rate to find the financing that works best for you and your financial situation.

1 comment:

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