Getting a Mortgage After Bankruptcy

If you have a bankruptcy (or foreclosure) in your past, getting a mortgage is more difficult. But not impossible. Here's what you can do to improve your odds right now.

This page:

  • Explains how to get a bad credit mortgage after bankruptcy

  • Lists what to look for (& what to avoid) in a bad credit mortgage

  • Helps decide if a fixed-rate bad credit mortgage is right for you

Over the next few pages, we examine all types of bad credit mortgages.

After reading this section, you should be familiar with all your bad credit mortgage options and, hopefully, have chosen one that meets your needs.

What to expect as a post-bankruptcy borrower

Things aren't going to be easy. Bankruptcy is about the most harmful thing you can have in your credit history (excepts, perhaps, for foreclosure, which can be even worse). Both can stay on your record for up to ten years.

The good news is, both their importance diminishes with time. Even with a bankruptcy, your credit should be past the really horrible stage in a couple of years and, after four years, things should be almost back to normal.

The big "if" here though, is that we mean four years of very responsible money management. And even with great behavior, your credit score won't shine if you've got too much debt or too much of the wrong kind of debt (read: credit cards).

So, what can you do now?

Polishing your profile right now

First off, have at least a year of spotless bill payment under your belt.

Make your down payment as big as possible, and document your income as thoroughly as possible.

Make sure you get a mortgage that fits your needs. Don't agree to a mortgage with prepayment penalties that extend over 2 or 3 years (so you can refinance if you need to). Your interest rate may be up to 12 points higher than on a normal home loan, so be sure you're comfortable with that level of responsibility.

Try a couple lenders. Bad credit products vary widely, so get a second opinion.

And, most importantly, make sure you get your mortgage from a lender who is completely on the up and up. The bad credit mortgage market has been, unfortunately, a predatory one in the past. So only shop reputable mortgage companies. (Here, we can help.)

Where to look for a mortgage

We always recommend that poor credit borrowers try a prime lender first, even though with a bankruptcy on your record, it could be a hard sell.

If you'd like to give it a shot, try Eloan. Their application is fast and free, and their mortgages come with no lenders fees.

For a great subprime lender, try Fullspectrumlending. They specialize in subprime mortgages, even for those with bankruptcies, and they're part of the very well-respected countrywide family of lenders.

Better yet, they won't charge PMI, and you can earn a $250 cash rebate by applying online.

Remember that with any credit-building mortgage, paying the loan on time is vital. Missing or making late payments are often penalized severely under these plans, so only undertake one if you're fully committed to building a history of responsible credit.

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