How A Bankruptcy Plays A Role In Mortgage Approvals

When it comes to getting qualified for a mortgage loan, a bankruptcy can play a crucial role in your ability to get approved. There are many factors that a bankruptcy has on the mortgage process. Knowing what to expect can help you improve your chances for a loan approval.

The Waiting Period

If a person has filed bankruptcy, it will be more difficult to get approved for a mortgage loan. Many mortgage loan programs will require a waiting period from the time the bankruptcy has been discharged before the mortgage can be approved. Depending on what type of bankruptcy that you filed will depend on how long the waiting period will be. If you filed a chapter 7 bankruptcy, then you will have to wait at least two years from the discharge date before the mortgage loan can be approved. The two year waiting period is based on a FHA home loan. A conventional mortgage loan will require a four year waiting period.

If you have filed a chapter 13 bankruptcy, the waiting period is still the same on a conventional home loan, but on a FHA mortgage loan, there is a way to finance a property while still in chapter 13 bankruptcy. FHA loan programs will consider the filing date when calculating the waiting period. A chapter 13 bankruptcy customer can qualify for a loan after one year from filing the bankruptcy. Since many clients are still in chapter 13 bankruptcy after one year, you must get approval from the trustee of your case, that you can add an additional debt like a mortgage loan. Without the trustee approval, you will not get approved for the mortgage loan.

All home loan approvals with clients still in chapter 13 bankruptcy require manual underwriting and must follow the FHA loan guidelines.

Reestablishing Credit

For many clients that file bankruptcy, the hardest step in getting a loan approved is that many loan companies require that the client has reestablished a positive credit history since the bankruptcy. Reestablishing credit history must also show no new derogatory accounts since the bankruptcy. For example, if you have a bankruptcy that was discharged in 2009 and in 2010, your car was repossessed, then you will not qualify for a mortgage loan.

Reestablishing credit history usually consists of at least a vehicle loan and a revolving credit account. Make sure to keep your credit card account balance below 10% of the actual credit limit. Home loans require the reestablishment of credit for qualification.

There are other mortgage programs besides FHA home loans and conventional mortgage loans that have different guidelines when considering a bankruptcy. These types of loans are considered non-traditional loans and many of these programs require a large down payment. Home loan rates on these programs are also usually 2 to 3 percent higher than a normal conventional home loan.

Avoid New Negative Credit

The most significant thing to remember after a bankruptcy is to reestablish credit and do not have any new negative accounts since the bankruptcy was filed. You want to show the mortgage company that the bankruptcy was an once in a lifetime event and will not happen again. If the loan company believes that there is a habit of bad credit or the likelihood of filing bankruptcy again, the mortgage loan will be turned down.

Bankruptcy is not a home loan killer, but if you have filed bankruptcy in the last seven years, it is important to make sure that you are doing everything necessary to have good credit, especially if you want to buy and finance a new house.

David White is a Sr. Home Loan Specialist who assist his customers with their Home Loans.

Making The Most Of The Current Mortgage Rate

These days anyone with a computer and an internet connection can find it fairly simple and convenient to keep up to date with the mortgage rates current trend, as well as many other pieces of useful financial information.

If you make a point of reviewing the current mortgage rate regularly, then over a period of time it becomes possible to identify the current trend and which direction rates are moving in. This can obviously be very useful for anyone looking to purchase a new home.

The majority of mortgage providers will allow clients to lock in the mortgage rates current on the date of application. You have to strike while the iron is hot. Timing the application process precisely can literally save you thousands of dollars.

Should rates go up after signing, the rate signed for holds. The bad news is that if rates drop, you could stand to lose a lot of money as well, so make sure you are certain before you contact a broker.

Keeping track of this data when there is so much money to be saved or lost can seem like a bothersome task. If you look on the bright side, you’ll be thankful that so much research can be done on the web. You don’t need to pay a financial adviser to do something you can do from your easy chair.

The advantages of researching this information online are many. For one thing there is no limit to the amount of times you can check this data, or any restriction on when you can view it, which is a vast improvement on the old days when a lengthy trek around town to visit numerous banks would have been required.

If you already own a home, you can still track mortgage rates current online to find a great rate for refinancing or for a second mortgage. You could be saving a bundle while using the money loaned to improve your home, consolidate debt, or even take a vacation.

A little regular effort to keep abreast of current mortgage rates can definitely help provide opportunities to save money in the long run.

Check out these personal finance based posts about current fixed mortgage rates.