Getting a Mortgage After Bankruptcy

Many of us experience financial hardship at least once in our lifetime and sometimes we have to make the hard decision to file for bankruptcy. After going through bankruptcy, lenders will not be willing to offer you any loans. Because of this, it will be difficult for you to get credit for anything you may need to purchase. Even lenders who would be willing to lend you money will most likely categorize you as a high-risk borrower and will offer you higher interest rates. Obviously, it is hard to prove to a lender that you are capable of making sound financial decisions when you have a bankruptcy on your credit report. For this reason, securing a mortgage after bankruptcy may not be so easy. However, it is not at all impossible.

After declaring bankruptcy, you must rebuild your credit completely as your previous good rating will be wiped away as well as the bad. You essentially have to start from scratch and work even harder to negate the effects of bankruptcy. Work on rebuilding your credit for at least two to three solid years before you decide to apply for a mortgage. Paying your bills on time, eliminating high-interest debts, and keeping away from loans are all great ways of starting to do this correctly.

After a period of about three years following your bankruptcy, you may also ask a good friend or a family member to co-sign a credit card or a small loan for you to help you rebuild your credit rating. Just keep in mind that you need to make all payments on time or the co-signee will take the fall. If anyone decides to take such a big step to help you out after your bankruptcy, you need to commit to keep all payments on time for them.

When you are ready to secure a mortgage, you should know that there are some government programs that you can avail of. These programs are specifically designed for people to receive help in securing a mortgage after they have declared bankruptcy. Some will work on your behalf to prove to lenders that you are qualified for a loan even after bankruptcy. They may also help you negotiate for lower down payments and interest rates. A steady income and solid payment history for a least the past couple of years will go a long way to help you qualify for one of these special government programs.

If you own the home you currently live in, it can also be used as equity to show a potential lender that you can qualify for a loan to pay for a new house. The less amount of money you need to borrow, the less they consider you as a risk. If you can use your current house to pay for much of what you need to secure a new one, lenders will probably be more willing to ignore the fact that you have declared bankruptcy in the past.

Securing a mortgage for a new home will not be easy if you have already declared bankruptcy. It will take some time as you need to prepare your credit rating to qualify for new mortgages, but it is achievable. Keep working on improving your credit rating by following the tips outlined above and you will surely be able to secure a reasonably affordable mortgage with great success.