Bankruptcy is an unfortunate situation that affects millions of people
each year. Because of the damaging effects of bankruptcy, this means of
eliminating debts should be reserved as a last resort. Yet, due to an
array of circumstances, bankruptcy is the only alternative to relieve
financial hardships. After a bankruptcy, many homeowners attempt to
rebuild their credit by purchasing a home. While possible, there are certain
limitations.
Qualifying for a Home Loan after Bankruptcy
Following a bankruptcy, many people choose not to finance large
purchases such as a home or automobile. Several lenders will approve a loan
application. Regrettably, these loans come with a huge price. After a
recent discharge, auto loans may include interest rates up to 18%, whereas
interest rates for homes may be several percentage points higher than
the market average. In either case, you can expect much higher monthly
payments, which limits your spending power.
In contrast, buying a home following a bankruptcy is one of the easiest
methods to quickly re-establish credit. Hence, if you have the funds
for a large mortgage payment, it doesn’t hurt to explore your options.
Which Home Loan to Choose Following a Bankruptcy?
Even though it is realistic to purchase a home immediately following a
bankruptcy, the financing options are restrictive. For the most part,
homeowners with good credit opt for FHA or conventional mortgage loans.
These particular loans offer reasonable terms and services. Moreover,
there are various loan programs to match different needs.
Unfortunately, if you have bad credit, qualifying for either of these
loans immediately following a discharge is not possible. In both cases,
those with past bankruptcies are subjected to a waiting period. For a
FHA loan, you are required to wait at least 24 months before applying
for a loan. With conventional loans, the wait period is four-years. This
rule was established in order to encourage credit repair before
purchasing a home.
Getting Approved for a Mortgage Loan
Homebuyers who are unwilling to delay purchasing a home may obtain a
mortgage through a sub prime mortgage lender. Sub prime lenders approve
loans to people one day following a bankruptcy. Furthermore, these
lenders offer a range of mortgage to assist those who require down payment
and closing costs assistance. Although the rates on sub prime loans are
slightly higher, these lender do not take advantage of people by
charging over-the-top mortgage rates.
Visit www.abcloanguide.com to find a
list of reputable online lenders for a sub prime mortgage loan.
View our recommended lenders for buying a home after bankruptcy.
Also, check out our recommended sources for a 3 bureau credit report.
