Buying a house after a bankruptcy takes a little research to find a bad
credit mortgage with reasonable rates and terms. But it can be done
with the
help of online lenders. By comparing financing offers, you can quickly
find
a home loan with good terms.
Finding The Right Mortgage
With a credit score less than 650, you will need to apply for subprime
financing with rates slightly higher than conventional home loans.
Surprime
financing is offered by traditional lenders, as well as specialized bad
credit lenders.
To get the most borrowing power, choose an adjustable rate or interest
only
mortgage. To further reduce your rates, plan on a down payment of 20%
or
more. Large cash reserves or a low debt ratio will also help you
qualify for
lower rates. But researching lenders is the surest way to find the
lowest
rates.
Remember too that with subprime lending, you dont pay for private
mortgage
insurance, even with less than 20% equity.
Before You Start Your Search
Before you start your subprime mortgage search, get a copy of your
credit
report. Check it for accuracy of your bankruptcy, and then use it to
get
loan quotes. That way lenders wont have to access your report and
further
lower your credit score with unnecessary credit inquires.
Securing Mortgage Terms For The Future
When you start comparing mortgage offers, make sure the terms are
favorable
for your future financial goals. If you plan to refinance when your
credit
score improves, makes sure there arent any fees for early payment.
This is
also a benefit if you move before the loan is paid off.
Another important factor to consider are closing costs, especially if
you
are planning a future refi. Paying extra thousands for a slightly lower
rate
doesnt make sense if you dont keep the loan for seven years or more.
Even
with the lower interest charges, you wont see a savings.
So take a look at the APR for a general idea of the total loan costs.
But
then look at the breakdown of the closing costs and interest rate to
find
the financing that works best for you and your financial situation.
View our recommended
Mortgage After Bankruptcy Lenders.
Carrie Reeder owns ABC Loan Guide, an online resource with information about Bad Credit Mortgage loans and Home Equity Line
of Credit lenders.
