Bankruptcy mortgage financing
Many people who file for bankruptcy wonder if they can get mortgage financing after the discharge of bankruptcy. This question has been looming around ever since and the answer to it is yes you can get post bankruptcy mortgage financing but will have to comply by certain conditions.
Qualifying for bankruptcy mortgage financing
Most of the lenders ask for a minimum period of two years since the discharge of bankruptcy before they can offer you mortgage financing. This two year waiting period can serve as a boon for you as you can get enough time to rebuild your credit to some extent.
Moreover, if you have filed bankruptcy under chapter 13 then your chances of qualifying for a bankruptcy mortgage financing are brighter.This is because to get a discharge you would have been paying your creditors and this can help your new lender develop trust that you would be able to pay off the loan in time.
Another aspect associated with the bankruptcy mortgage financing is that you would have to pay a higher interest rate because the lender still considers you as a high-risk borrower. So you should be prepared for paying a higher monthly installment.
Cost of bankruptcy mortgage financing
Getting bankruptcy mortgage financing can be an expensive deal. As mentioned previously you are required to pay a higher interest rate hence your monthly payments would be as it is high.Besides you would also have to pay private mortgage insurance (PMI) every month along with the monthly payments.
Most of the lenders have the PMI included with the monthly payments but before you sign up for the mortgage financing, make sure that you have verified with the lender.The lender asks you to pay PMI to protect himself in case you are unable to pay the mortgage on time.
Apart from this you would have to pay a down payment amount ranging from 7-20% of the mortgage amount. The higher the down payment, the lower you are a risk to the lender and more are your chances of qualifying.
Advantage of taking bankruptcy mortgage financing
The main advantage of taking bankruptcy mortgage financing is that it can help you recover in a major way from bankruptcy and restore your credit.Once you start making payments towards the mortgage finance and your payments are reported to the bureaus you would see that your credit score gradually starts increasing.
Over the years you can develop equity in your house and consider taking a refinance that would pay off your bankruptcy mortgage financing and would start a new loan term at a lower interest rate. This equity can also be used in different ways to suffice your financial needs.
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