The Challenges Of Security A Mortgage After A Bankruptcy
You may have filed for bankruptcy in the past to get out of debt, but there could be a day where you are ready to purchase a house. When the day comes, you'll need to know how that bankruptcy affected your finances, especially when it comes to securing a mortgage. Know the following things before you proceed with getting your financing.
It Can Take A While To Quality
There are a few rules regarding your bankruptcy that will impact how long you must wait before you are able to get a mortgage of any kind. Expect to wait about two years if you used Chapter 8 for your bankruptcy, and 3 to 5 years if you used Chapter 13. Thankfully, there are some ways to decrease the waiting period, such as the reason why you needed to use bankruptcy to get out of debt. Making great progress towards improving your finances after a bankruptcy can also help.
The best thing you can do is work with your lender to know what they are looking for to approve your mortgage. Every lender will have their own requirements, so it also means it is worth shopping around with different lenders.
Your Loan Type Can Affect Eligibility
Not only do you have waiting periods associated with each type of bankruptcy filing, but the kind of loan you want can have a short or long waiting period. Be aware that the hardest kind of loan you can get after a bankruptcy is a conventional mortgage, which is due to the waiting period. Other loans can result in shorter waiting periods, like an FHA loan, but you'll see higher interest rates and potentially paying PMI for the life of the loan.
You May Need A Big Down Payment
One way to show that you are capable of bouncing back from a bankruptcy is having a large down payment saved up to help lower the amount of money that you need for the loan. If a bankruptcy was able to get you back on the right path toward financial freedom, a large down payment can show that you are doing much better with managing your finances.
You May Need A Cosigner
Another option is to have someone cosign the loan with you. This means that they will take on the financial obligation if you were to default on the loan, making you less of a risk to your mortgage lender. It can be tough to find a cosigner, but if someone trusts you enough to do it, then it is definitely another option to get a mortgage.
Contact a lender, like GSF Mortgage Corporation, for more help.