Bankruptcy Mortgage Lenders

Find Out Why Most Lenders Look Down On Bankruptcy And How You Can Avoid This

Why Do Most Lenders Look Down On Bankruptcy? Can This Be Avoided?

Because of a general stigma associated with bankruptcy in general, many experts do not advise potential homebuyers to file for bankruptcy if they plan on purchasing a house in the near future. What is considered "near"? About two or three years. Most lenders want to see that someone who has gone through bankruptcy is not about to fall into the same financial trap again. But there are ways around the two to three year wait.

Apply for a home loan with 20 to 50 percent of the price of the home as a down payment. Lenders realize you've just placed that much equity in the home and it reduces their risk. Have three months of cash reserves in the bank after the down payment. Lenders see that as stability. Have a good job; long term, steady employment for several years' shows, again, stability.

Resign yourself to getting a high interest mortgage for the first year or two, perhaps with a provision that you be reconsidered for a lower rate in one to two years. It gets you the loan and gives you a chance to build trust with your lender. It can also improve your credit rating.

The color of the horse in the race can make a difference

The type of bankruptcy filed is also of concern to mortgage lenders. Potential homebuyers who have filed a Chapter 13 bankruptcy are likely to have a better chance of mortgage home loan approval than homebuyers who have filed a Chapter 7 bankruptcy. Chapter 7 means you walked away from your debts. Chapter 13 means you have or are in the process of paying back much of the money to your creditors.