In the past, traditional mortgage lenders have automatically rejected people who had declared personal bankruptcy. Many potential home-buyers or exiting homeowners felt they must wait at least seven to ten years after a bankruptcy to be eligible for financing. This is a common misconception.
While some people declaring bankruptcy have had trouble managing their money, a larger number of those declaring have simply experienced unfortunate events. Americans have been filing bankruptcies at record-high levels over the last many years, especially last year.
Though a bankruptcy is certainly a blemish on a credit report, it does not necessarily disqualify a borrower. Recognizing that sometimes bad things happen to good people, some select loan officers are becoming more willing to take a calculated risk.
Some lenders use a scoring system to determine whether potential borrowers are a worthwhile risk. Unfortunately, bankruptcy gives an automatic low score. However select lenders are beginning to look beyond the scores and look at the individuals in need.
Instead of waiting two or four years after being discharged from bankruptcy, some mortgage professionals are willing to give a home loan much sooner. Those who have declared Chapter 7 bankruptcy liquidation may be eligible for a loan in as little as one day after discharge, and those who have declared Chapter 13 may be eligible for a loan even while they are still in their plan.
Another common misconception is that a previous bankruptcy on your credit report will require you to have a large down payment and pay extremely high rates and points. There are currently programs available with no down payment required and with very attractive rates and points.
Some lenders are even pre-qualifying buyers for a loan, saving time and making the home-buying experience easier and more efficient. When a buyer pre-qualifies they will have the advantage of greater negotiation power.
No matter what the situation, select mortgage professionals have a program that will work for the buyer with a bankruptcy history. If a buyer cannot get approved, there are customized plans that can re-establish credit to help the buyer become mortgage ready, ensuring homeownership in the future.
Because of new options, bankruptcy no longer needs to stand in the way of getting a home loan. With the help of more creative lenders, those who have experienced financial difficulty will have an easier time getting a mortgage.