Buying a house after bankruptcy might seem like an impossible task at times. Even though it is going to be difficult, it is very possible for you to purchase a house again after you have filed for bankruptcy. Here are a few things to consider about buying a house after bankruptcy.
When you try to buy a house after filing for bankruptcy, the lender is going to take a look at your credit report. If you are applying for the mortgage within 10 years of filing for bankruptcy, they are still going to be able to see that you filed. In most cases, they are going to take this into consideration when making their decision. However, it is possible for you to build up your credit score relatively quickly after a bankruptcy. By setting up credit sources and making regular monthly payments without missing any, you should be able to boost your score back up to a reasonable level even before the bankruptcy drops off of your credit report. Many people are finding that they can purchase a house within 3 to 5 years after filing a bankruptcy.
When you file for bankruptcy, you should get used to the idea that you are going to have to pay higher interest rates for a while. When you are trying to get a mortgage, this is going to be no exception. Most of the time, they are going to put you in the category of being a subprime borrower. This means that you are classified as a high-risk individual and they are going to ask you to pay a higher amount of interest as a result.
When you try to buy a house after bankruptcy, you may find that the lender tries to offer you some unorthodox loan terms. For example, they might try to give you an interest-only mortgage. This is a type of mortgage for which you pay only the interest on the loan every month. Then at the end of the loan, you have to come up with a balloon payment for the principal of the loan. Be careful with loan suggestions like this from your mortgage lender. While they can get you in the house that you want, they are going to typically add to your financial problems.
You should also expect to have to come up with a large down payment if you want to purchase a house after bankruptcy. Most lenders are going to have bigger down payment requirements for you than they do for traditional borrowers. If you can come up with 20 percent of the value of the house, this is going to significantly help your chances of getting a mortgage. It is also going to lower the interest rate that you pay and your monthly payment. By doing this, you will be able to eliminate paying private mortgage insurance on your loan payment every month.