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 don't 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 won't 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
aren't 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
doesn't make sense if you don't keep the loan for seven years or
more. Even with the lower interest charges, you won't 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.
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