Obtaining Mortgage Loan after a Bankruptcy

Some people lose hope of getting a new home loan after their bankruptcy.  Although bankruptcy affects the loan approval process, there is still a way for you to obtain a mortgage loan.  The key is to understand how bankruptcy affects the loan application and approval process. 

Some people lose hope of getting a new home loan after their bankruptcy.  Although bankruptcy affects the loan approval process, there is still a way for you to obtain a mortgage loan.  The key is to understand how bankruptcy affects the loan application and approval process. 

Understand the Mandatory Waiting Period

Bankruptcy makes it more difficult for you to obtain a loan approval.  First and foremost, you have to contend with the mandatory waiting period.  The length of the waiting period depends on the type of bankruptcy you filed. 

For Chapter 7 bankruptcy, the waiting period is at least two years from the date of discharge before you can get an approval for a new loan.  This two-year wait is based on FHA home loans.  If you are applying for a conventional mortgage, then the mandatory waiting period is typically four years. 

For Chapter 13 filing, the waiting time for conventional mortgage is still four years.  There is some flexibility though if you are applying for FHA mortgage.  The filing date will be considered when you apply for a loan.  You can get an approval after a year of your filing.  If you are still in Chapter 13, you must secure an approval from the trustee that allows you to add a new debt.  You can not get a loan approval without the consent of the trustee. 

Ways to Reestablish Credit

All mortgage lenders will require you to reestablish a positive credit before they entertain your loan application.  When you reestablish your credit, you must not have a new negative account since your bankruptcy. 

To reestablish your credit, you need to obtain at least a car loan and a revolving credit account.  It is important to keep your revolving account below the 10 percent actual credit limit.  Aside from FHA and conventional mortgage loans, there are also other types of home loans available for you.  However, such loans may have different and more stringent requirements.  For example, you may be required to post a higher down payment for the property.  And in most cases, the interest rates that you will get are 2 to 3 percent higher than the rates of conventional mortgages. 

Make Sure to Avoid New Negative Credit

One of the most important things that you have to do after a bankruptcy is to reestablish your credit.  You must also remember that having new negative credit could adversely affect your chances of getting a new home loan.  A negative credit is a sure indicator that your application will be disapproved. 

You have to show to the mortgage companies that your bankruptcy was a fluke and a once in a lifetime incident.  By avoiding a new negative credit, you are giving assurances that the bankruptcy will never happen again.  A new string of negative credit may indicate that you have a bad habit of not paying your debts.  If this is your case, then your loan application will be declined by the lenders. 

It is incorrect to say that bankruptcy is a mortgage loan killer.  You can still obtain a home loan after your bankruptcy.  What you need to do is to quickly reestablish your good credit. 

Article Tags: Mortgage Loan, Loan After, Mandatory Waiting, Waiting Period, Negative Credit

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