How to Negotiate a Post-Bankruptcy Mortgage
Negotiating a post-bankruptcy mortgage isn't too difficult as long as sufficient time has passed. Bankruptcy dissolves a debtor's outstanding balances or reorganizes debts. Filing bankruptcy indicates poor debt management, and this can scare potential lenders. While a bankruptcy can affect a credit history for up to 10 years, debtors can purchase properties before the information falls off their reports.
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Instructions
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Keep track of your credit score. A minimum 620 credit score helps you qualify for a mortgage loan after bankruptcy. Aim for this score by rebuilding your credit with a secured credit card (available from any bank). Pay this account on time. Keep the balance on your secured account low.
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Increase savings in preparation for a down payment. The more cash you have for a down payment, the better your chances of negotiating a mortgage loan post-bankruptcy. Minimum down payments depend on the type of loan. For example, Federal Housing Administration mortgage applicants can get mortgages with less than 5 percent of the purchase price (for example, $10,000 down payment on a $200,000 mortgage loan). Cut spending to increase your savings. Shop at thrift stores, use coupons, forgo a vacation or increase work hours.
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Prove income stability. Consecutive employment for at least two years post-bankruptcy helps you qualify for a mortgage loan. Defer career changes and stay with your employer (or at least remain within the same field) while preparing for a mortgage loan. Be ready with a bank statement or past income reports to show your lender.
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Apply for financing after two years. Trouble-free approvals and reasonable mortgage rates are more common two years after a bankruptcy. Submitting a mortgage application earlier can trigger a higher rate and higher home loan payment. Talk to your lender about FHA mortgage loans to take advantage of low credit score requirements.
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Tips & Warnings
Conventional mortgages have a higher minimum score requirement of 680.
