Mortgage with a Bankruptcy

Bankruptcy has many negative effects on a person’s life but their point of view of not being able to apply for a mortgage is wrong. It is true that some years back people who filed bankruptcy were put down by most of the lenders but today this is not the case.

Bankruptcy Chapters and Mortgage
People who filed chapter 13 have more chances to get a mortgage loan than any other chapter. In this bankruptcy the borrower has to pay the reduced debt within the next 3-5 years. Since a person tries to get his finances back on track by keeping his assets and paying the debt, lender take this as a positive credit repair effort. A chapter 7 bankruptcy, however, liquidates all assets and people who have it face difficulty in securing a mortgage loan due to a badly damaged credit history.

There are still number of ways in which you can improve your chances of getting approved for a mortgage with a bankruptcy.

Time Factor
You will be turned down by most lenders if you apply directly after the bankruptcy. Most lenders prefer those people who have filed bankruptcy 2 years ago. In this time you should try to get credit cards and use them wisely. This will not only improve your credit score but it is also seen by creditors positively. Lenders may even provide you a 100 percent mortgage financing.

Down Payment
Your monthly budget will have a portion that is paid as the bankruptcy payment. The rest of the money should be spent wisely. Start saving money, so that when you apply for a bankruptcy mortgage after couple of years you have at least a 3-5 percent down payment. The down payment greatly improves your chances of getting approved for a loan. If you couldn’t save money there are down payment assistance programs available and of course friends and family. You better ask the lender about it because some of them don’t take down payments from other resources.

Sub Prime Lender
If you apply for a loan through a bank or a mortgage company, chances are that you will come out of their office empty handed. In case you have spent some years gaining positive credits and have saved a down payment the interest rate on the loan you get is still going to be very high. Sub prime lenders work with those people who have bad credit, bankruptcies and no credit. These lenders provide good interest rates and repayment terms.

Mortgage Broker
A mortgage broker handles bankruptcy mortgage cases all the time. They are helpful in getting you a loan by contacting the lenders on your behalf.

Upfront Fees
If any lender is asking for upfront fees such as application fee, fee for getting your credit history, the loan processing fee etc then you should not do business with them. You are already short on funds and these lenders will take advantage of your misfortune.

To get a mortgage loan with a bankruptcy largely depends on your behavior. If you carry out positive steps for improving your credit worthiness then there are many lenders who would lend you mortgage loan after bankruptcy.