Buying a house after bankruptcy
People file bankruptcy due to various reasons. It is a general view among people who have filed for a bankruptcy that they are not eligible to get a loan. People who have faced a bankruptcy earlier would often need some money to finance buying a house after bankruptcy but are hesitant to approach the lenders because of their poor credit history.
If you are one of the people who have faced a recent bankruptcy and are looking forward to buy a house then you need not be hesitant in applying for one because these days there are lenders who would give out loans for new home to people who have gone through a recent bankruptcy. The lenders would usually look at two major factors while giving the new home loans to people having faced a buying a house after bankruptcy. These factors include your monthly income and the down payment that you are ready to give towards the loan.
Now before your new home loan gets approved the lenders would ask you to wait for a minimum period of two years after the bankruptcy is discharged. After this waiting period is over the lender would be ready to give you a 100% financing or your house. This 100% financing can be received if you have been prompt in making your payments after the bankruptcy. If you need the loan amount before the two-year waiting period is over then you should have maintained a perfect payment history after the bankruptcy. Remember that all your payments are reported to the major credit bureaus and this makes a lot of difference to your credit report.
When you take a new home loan after buying a house after bankruptcy you are required to make a down payment towards the loan. The amount of down payment that you make is a major factor in determining the interest on the loan and the monthly payments that you make towards the loan. The down payment amount is usually 5% of the total amount of loan. Qualifying for the loan can be easy if you are ready to give this down payment amount.
Arranging for the down payment amount is not a difficult task. There are a number of down payment assistance programs like Neighborhood Gold, Nehemiah Program etc. With the help of these programs the seller helps you to pay the down payment amount. Besides these programs there are many other grants that would help you out with the down payment and you dont need to pay back these grants. If you have a 401K investment plan then you can borrow some amount from it and invest in later when you take a second or a third mortgage on your house. Apart from these options you can also take help from friends and relatives. However you would have to inform the lender about the source from where you get the down payment so that everything is carried out according to the rules.
When you consider taking a new home loan after a bankruptcy then it is advised that you approach a sub prime lender for the new home loan. The sub prime lenders are often very co-operative and help people who have a bad credit get a loan that have been refused for loans by banks and other financial institutions. But if you manage to improve your credit score in the meantime then you should approach a prime lender. The sub prime lenders are flexible with the eligibility criteria for the loan. For getting a new home loan from a sub prime lender you dont have to typically wait for two years. You can get going by borrowing money from these sub prime lenders.
The sub prime lenders usually charge an interest rate of one or two percent above the standard or prime rates. If you have filed immediately after a bankruptcy then the rates are usually high. But as you keep on improving on your credit score the rates keep on moving down. If you manage to improve your credit score by the end of two years then you are charged at an interest rate that is generally dependent on the debt to income ratio, the amount pending to be paid and the payment history after the bankruptcy. The terms and conditions with a sub prime lender are flexible as compared to a prime lender. The sub prime lenders at times offer hundred percent financing. When you take a new home loan then the finance fees is considered as a part of the principal amount.
If you have had a recent buying a house after bankruptcy then you can even qualify for a prime lender loan. But for this you would have to have excellent payment records after the bankruptcy. With the prime loans you can get low rates and also lesser number of fees. Besides this the prime lenders have standard terms and this limits the amount that you can borrow.
Most of the lenders off late have started offering both prime and sub prime offers to people who need funds. Most of the banks do offer loans to people with bad credit but they wont always consider offering a new home loan to people who have undergone bankruptcy. You can start your search by talking to lenders and getting quotes from them. The most important thing is that you should be true about your credit history while approaching these lenders so that a trust is built between you and the lender. If you spend some time on the Internet then you can easily find out a lender who readily gives out loans to people who have undergone a bankruptcy.
The Internet offers some very good rates for new home loans. You should contemplate looking for a loan online, as these loans are cheaper as compared to the loans offered by traditional lenders.
Other Articles
