Subprime Mortgages And A Past Bankruptcy
Below is a MRR and PLR article in category Finance -> subcategory Debt Consolidation.
Subprime Mortgages and Past Bankruptcy
Overview
Even if you have a Chapter 7 bankruptcy on your credit report, you can still qualify for a subprime mortgage. Once approved, a mortgage can help you improve your credit history, making you eligible for lower interest rates in the future.
How Bankruptcy Affects You
The impact of a bankruptcy on your credit score depends on how recent it is. If discharged less than a year ago, you may qualify for a D loan, which typically requires a 30% down payment and carries a high interest rate.
Waiting a year may allow you to qualify for a B or C loan, which come with lower rates and down payment requirements. After two years, you might be eligible for an FHA home loan, and in four years, a conventional loan could be within reach.
Lenders will also want to see a consistent payment history, including credit and rent payments. Maintaining cash reserves for six to twelve months can help mitigate your credit risk.
Finding the Right Lender
Not all subprime lenders assess borrowers the same way, so it's wise to shop around. You might qualify for better terms with different lenders. To find the best deal, request quotes from multiple lenders.
These quotes can be obtained online or over the phone. Online platforms often provide accurate estimates based on your information. You can also use mortgage broker sites for multiple quotes from various financing companies.
Preparing to Apply
Before applying, ensure all accounts from your bankruptcy are closed. Request a copy of your credit report to verify your details. You might also consider including a letter explaining your bankruptcy circumstances, as some lenders may view situations like illness or job loss more sympathetically.
Building a Better Credit Future
After purchasing your home, focus on rebuilding your credit by making regular payments. Within two years, you might qualify for a conventional mortgage with more favorable rates.
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