Recent Bankruptcy? Its Not Impossible to Obtain a Home Loan

Because the new bankruptcy laws go into effect on October 17, 2005, more Americans than ever are filing for relief using the federal bankruptcy laws. The vast majority are simply overextended and cannot possibly repay the obligations they have open.

However, for many filers, the opportunity of homeownership may be possible immediately after discharge. Ironically, some those that would not previously qualify for a mortgage do qualify after a bankruptcy.

How is that possible? An example of this is Dave Olson (a fictional character). He earns $4,000 per month, spends $1,000 on rent,$250 on car payments, and $2,000 on credit card minimum payments. The DTI* (debt-to-income) ratio of this person is 81.25%. Since his credit score is low (600 middle FICO), the only option is a mortgage that requires full documentation. Most of those loans require a DTI of 50-55% maximum.

The Chapter 7 bankruptcy is filed and Dave gets a discharge. He reaffirms his auto loan and still rents for $1,000/month. However, now his monthly debt is much lower (($1,000+250)/4,000=31.25%).

The bankruptcy has actually increased his chances of obtaining financing for a purchase. Many times, the credit score is the same after the bankruptcy as prior to filing (unless creditors report incorrectly). By filing simple dispute letters with the three credit bureaus, those discrepencies can be cleared up within a few months.

It makes sense that borrowers are most ready to borrow for home purchases after bankruptcy because they cannot file Chapter 7 for 6 years, their obligations are lowered, and the property being purchased is secured. That means the lender can repossess the property if payments are not made timely.

There are some things to keep in mind if you are purchasing a home after a recently discharged bankruptcy.

1) A downpayment isn't always necessary, but it will improve the rate.

2) Most people opt for an Adustable Rate Mortgage (ARM) since the rates are much lower than a fixed and they plan to refinance in 2-3 years.

3) Most of these loans have a prepayment penalty that matches the fixed period of the financing.

4) Most lenders require cancelled checks or verification of rent paid not later than 30 days in the past 12 months.

5) A foreclosure before the bankruptcy is hard to overcome. A foreclosure as a result of the bankruptcy usually doesn't count.

Everyone's situation is different. To ensure the best service, be sure you contact an experience mortgage originator that will take the time to listen to your situation and explain all the possibilities. It shouldn't cost you anything to inquire.

Clinton Bengtson has been a mortgage originator (loan officer) for almost 5 years. Prior to that, he was a CPA working at several large companies. Clint Bengtson has helped hundreds of people become homeowners that were declined at other lenders. Experience is important and can mean the difference between approved and not approved. Visit his website at http://www.mnmortgage.net for more information.

---

How to Find the Best Mortgage

The purchase of a new home is one of the... Read More

Refinancing and Car Finance - Is it worth it?

Refinancing and Car Finance - Is it Worth It?No doubt... Read More

Buying a Home With Bad Credit - Tips on Finding the Right Broker or Lender

You can buy a home with a bad credit record;... Read More

Mortgage ? What, Why, When, and How?

What is a mortgage? Here's what The New Merriam ?... Read More

Rates May Be Rising: Mortgage And Refinancing Preparation Made Simple For You

Buying a home is probably the single largest investment most... Read More

Mortgage Free In 15 Years!

Imagine paying your mortgage off in 15 years! Think of... Read More

Helpful Mortgage Advice

Mortgage advice overwhelming you? Many people get advice from everyone... Read More

Bad Credit Loans Authenticate What Is Positive About Bad Credit

This might not be the front page news but it... Read More

Avoiding Foreclosure Scams

If your mortgage company is threatening foreclosure, there are things... Read More

Home Loans ? Lenders Continue to Offer High-Risk Loans

Home prices in the Untied States continue to soar, and... Read More

What is a Fixed Rate Mortgage?

As the term implies, with a fixed rate mortgage the... Read More

How Homeowner Can Save Their Home From Foreclosure

Drive around and see how many signs you see that... Read More

How To Save Hundreds A Month On Your Mortgage

When it comes to American spending habits, the sad truth... Read More

Benefits of a Remortgage

There are many benefits in choosing a remortgage, some of... Read More

5 Things In Selecting The Best Mortgage - You Should Know

Your goal is not only to find the best rates... Read More

Zero Down Mortgage Loans - Is 100% Financing a Good Idea and Can You Get Approved?

Are you wondering if you can get approved for a... Read More

Mortgage Loans Explained In Plain English

With the many different kinds of mortgage loans out there,... Read More

Money Smart Homeowners Use this Mortgage Strategy Every Time

There are currently more than 50 million home mortgages in... Read More

Kings Bay Georgia Mortgage Information

When choosing the right mortgage company for your home purchase... Read More

How To Determine The Price Of Your Home

Why is it that some homes sit on the market... Read More

Are Biweekly Mortgages Really Worthwhile?

You may have heard people, especially mortgage lenders, extolling the... Read More

What You Dont Know About The Real Estate Process, Some Inside Secrets

Some people in the real estate industry have a terrible... Read More

Alternative Options For Rising Interest Rates

As interest rates have risen in the last six weeks... Read More

Home Equity Loans ? There?s Gold In That There House

To paraphrase an old familiar quote that goes "there's gold... Read More

Finding the Best Home Improvement Loan Rate

If you're looking for a good home improvement loan rate,... Read More

Looking for a Bad Credit Home Improvement Loan

To make needed repairs to your home without the advantage... Read More

A Guide to Quick Homeowner Loans

The search for quick homeowner loans can seem futile at... Read More

What is a Home Equity Loan?

A home equity loan is a loan that is guaranteed... Read More

What is an Offset Mortgage?

An offset mortgage is very similar to a current account... Read More

Non-conforming Home Loans vs Conforming Loans

The simple definition of a "non-conforming home loan" is: You... Read More

Mortgage Debt Elimination

The prospect of mortgage debt elimination is something that many... Read More

How to Use a Home Equity Line of Credit Calculator

Most home owners know that the lower the interest rate,... Read More

Using a Home Mortgage Calculator

There are a variety of tools online that you can... Read More