Buying a home is more difficult after bankruptcy, but it is possible to get mortgage loans after bankruptcy much sooner than many think. It is a matter of finding the right mortgage deal.
The story goes that bankruptcy rulings put paid to the hopes of buying a home, at least for the foreseeable future. But in fact, this is not true. It is possible to secure mortgage loans after bankruptcy, and get the property most desired.
But at the same time, there is little point in expecting excellent terms, low interest rates and easy approval. Getting any loan approval despite poor credit history is never going to be easy anyway, and given the size of a mortgage, lenders are quite protective of their investment.
Thankfully, however, there is a variety of mortgage loans available to those who have been declared bankrupt. The terms of each can vary, and the sources can be very different, but the right one is dependent on the specific situation each applicant is in.
Why Bankruptcy Is Not Always Good
In many cases, bankruptcy is seen as a viable solution to a desperate financial situation. When debts are becoming too much to handle, then writing them off and lifting the pressure off ones shoulders can be a good decision. However, there are consequences to pay, so getting mortgage loans after bankruptcy is that more difficult.
Generally, bankruptcy rulings mean that your credit record is tainted for a minimum of 2 years. The effects, however, can be felt for up to 10 years with lenders applying higher interest rates or lower loan limits in accordance with their own lending policies.
Seeking loan approval despite poor credit history is often easier, but once the ruling is made, the challenge of securing a mortgage loan becomes even harder. Often, approval can only be given once the courts have agreed to a mortgage being granted to the applicant.
Mortgage Options Available
Standard Mortgage Loan When applying for a standard mortgage loan after bankruptcy, it is necessary to get a mortgage note before submitting an application. However, there is also a minimum down payment to make on the property, of around 20% of the purchase price.
Bad Credit Mortgages Issued to bad credit borrowers, as well as bankrupt individuals, this option facilitates mortgage approval despite poor credit history. However, the terms available are pretty poor. For example, the interest rate charged is always high. Successful applicants usually have a large income and good job security.
Bankruptcy Mortgage – A bankruptcy mortgage loan is specifically designed for bad credit borrowers who have their debt forgiven or consolidated, rather than bluntly made bankrupt. A forgiven debt is one that has been partly repaid before bring written off in full. Chapter 13 bankruptees can apply for the mortgage after one year, and Chapter 7 bankruptees can apply after 4 years.
Federal Housing Administration (FHA) It takes 4 years to secure a conventional mortgage loan after bankruptcy. But funding from the FHA is available after just one year. The main reason is that an FHA is secured by the government – or at least 25% of the sum borrowed. However, the selection of homes is narrow, with low-cost housing mainly available.
Corporate and Industrial Mortgage This is not an option for the usual people seeking mortgage approval despite poor credit history. Instead, it is for companies that are buying property to house a business, or even manufacturing or processing facility. There is a certain amount of freedom over the size of the mortgage loan, with its term between just 2 and 30 years.