Bankruptcy & Mortgage Loan Interest Rates ...
If you have filed for bankruptcy in the past seven to ten years, you should expect to be quoted high interest rates for a new mortgage loan as compared to those without a bankruptcy. Sometimes the mortgage interest rate can be 3 or 4 points higher as compared to applicants with good credit and good credit score.
Getting a low interest rate mortgage loan will be extremely difficult, if not impossible. The bankruptcy information will be on your credit report and will have lowered your credit score. You will be considered a high risk to mortgage lenders.
Yet there are several ways you can get a better interest rate, one that is not quite as high a most lenders offer to high-risk individuals.
One way to get a lower interest rate or the best interest rate for your mortgage loan is to wait at least two years after your bankruptcy debts have been discharged. This allows you time to rebuild credit by paying all of your bills on time. During this two-year time, make sure none of your bills are late, including rent, car payments or utilities.
Another way to get the best possible interest rate is to show the mortgage lender proof of paying your rent on time for at least two years. You can make copies of your cancelled rent checks or even have your landlord write a letter regarding your rent payment history. This shows the mortgage lender that you have been able to make a large monthly payment over this period of time.
In addition, using a mortgage broker to assist you in finding the best possible bankruptcy / high-risk mortgage interest rate should be considered. Most mortgage brokers have extensive experience in handling these types of bankruptcy mortgage requests. Many times mortgage brokers can immediately contact specific mortgage lenders who will not base their entire approval and interest rate offer decision just on the credit history and credit score numbers.
Finally, offering at least a 20% down payment of the full purchase price of the home you wish to buy will help with lowering the interest rate on a high-risk bankruptcy mortgage loan. For instance, if the purchase price for the home is $100,000, offer to put at least $20,000 down with the mortgage lender financing $80,000. This shows the mortgage lender that you were able to save this amount of money over a period of time, and it relieves them of the full burden of the money required for the purchase.
Using the above information may help you avoid the excessively high interest rates bankruptcy mortgage applicants usually experience. Yet, do be prepared to pay higher than normal interest rates if you have a bankruptcy listed on your credit file.
