A common myth after bankruptcy is that you have to wait seven years before becoming eligible for a mortgage loan. This common misunderstanding prevents many homeowners that would otherwise qualify for a mortgage from applying because of their credit. Here are several tips to help you qualify for a mortgage and avoid overpaying after bankruptcy.
There are mortgage loans available for homeowners with any credit rating; how much you pay depends on how much time you have to invest. It is possible to qualify for a mortgage even one day after your bankruptcy is completed. Government programs through the FHA and VA could save you money by qualifying for a loan without using a subprime mortgage lender.
If you are unable to qualify for a government backed mortgage loan you could qualify for a conventional mortgage if your bankruptcy is at least 48 months old; Fannie Mae guidelines do allow homeowners with bankruptcies to qualify for traditional financing after this timeframe has passed.
The basic criteria that lenders look for is that you have reestablished credit after your bankruptcy is discharged and have a favorable payment history. If you’re under the impression that reestablishing credit after bankruptcy is too difficult, think again. There is an entire industry of consumer credit companies that cater to homeowners with poor credit and recent bankruptcy. You can expect to pay a higher mortgage rate for at least the first two years that you own your home; however, in as little as 24 months of making your mortgage payments on time and using credit responsibly you will qualify for a conventional mortgage at a competitive interest rate.
You can learn more about your mortgage options, including costly mistakes to avoid with our free mortgage tutorial.