A recent bankruptcy will decrease your credit rating. However, a bankruptcy doesn't mean you're unable to buy a home. Getting a mortgage loan after a bankruptcy isn't impossible. In fact, a mortgage can help rebuild your credit history. But before selecting a lender and completing a home loan application, it's vital to educate yourself on the best ways to get a mortgage after a bankruptcy discharge.
Allow two years to pass before applying for a home loan. Some lenders will approve your mortgage loan application one day after a discharge. However, they'll charge a high interest rate, which increases your home loan payment. To get a better rate, wait at least two years and re-establish good credit.
Apply for a new line of credit. Open a new line of credit to begin restoring your credit history. There are auto loans to help people with bad credit, and several banks and financial institutions offer secured credit cards, which can also help you rebuild a strong credit history.
Pay your bills on time. Once you've opened a new line of credit, resolve to pay your bills on time. Late payments reduce your credit score and lower your odds of obtaining a mortgage after a bankruptcy discharge.
Maintain a low debt-to-income ratio. Pay off your credit card balances and maintain low debts to increase your credit score and qualify for a home loan.
Save money for a down payment. Having a down payment often results in a lower interest rate, and it improves your approval odds. The traditional down payment is 20 per cent of the purchase price, but some lenders are prepared to accept down payments as low as 3 per cent of the purchase price.
Contact a mortgage broker. To get the best home loan deal, contact a mortgage broker and request no-obligation loan quotes. This way, you're able to compare multiple offers from multiple lenders and choose the best mortgage package.