Mortgages For Discharged Bankrupts Summary
Although bankruptcy is a serious decision, the consequences of being declared bankrupt do not last forever!
Should you be rebuilding your credit history with the objective of seeking a mortgage, it would be highly recommended that independent financial advice is sought in plenty of time ahead of any application to enable any changes to a credit file to impact a credit score and to explore the options available on the market to seek a mortgage.
High street lenders will often refuse a mortgage application from someone that has previously been bankrupt even after the discharge, however, there are specialised lenders that would analyse an application further before making a decision.
Financial advisors will be best placed to advise on which specialised lenders would be appropriate and the likelihood of being accepted for a mortgage.
Call us today on 01925 906 210 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.
Get in touch.
Whatever your mortgage requirements a member of our experienced team are on hand to advise you on the best deals.
What Happens When It Is Time To Renew Your Mortgage
Should you have continued to pay your mortgage through bankruptcy, it can be a little confusing knowing where you stand when it comes to renewing your mortgage. Are you able to stay with the same bank, or do you need to move? How does it work if you need to get a mortgage with another bank? It is important to remember that most banks would rather you renewed your mortgage and continued to pay off the amount and interest, rather than foreclosing on your property. This is because it would mean potentially losing any future profits by selling it at a disclosure price that is reduced. Therefore, provided that your mortgage payments are current, you should be able to renew your mortgage with a lender after bankruptcy.
What Types Of Mortgage Can I Get After Bankruptcy
After bankruptcy and after fulfilling the required waiting period, you can get a conventional mortgage that follows Fannies or Freddies guidelines. You can also get an FHA mortgage, which you may have an easier time qualifying for because it has a lower minimum credit score requirement and shorter post-bankruptcy waiting periods. VA loans and USDA loans may be available to you as well if you meet the requirements.
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What Happens After Filing For Bankruptcy
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In a Nutshell
Knowing what happens after you file bankruptcy can make it seem less intimidating. Read on to learn about filing Chapter 7 bankruptcy, the meeting of creditors, keeping your car, and why creditors must stop contacting you after filing.
Knowing what happens after you file bankruptcy can make it seem less scary. Read on to learn about filing Chapter 7 bankruptcy, the meeting of creditors, keeping your car, and why creditors must stop contacting you after filing.
Getting A Mortgage With A Recent Bankruptcy Less Than 2 Years
- You will need to have up to 20% down payment if your bankruptcy was less than 2 years ago
- Your credit score can be less than 600 and as low as 500
- Self employed borrowers can qualify for this loan
- Interest rates will be slightly higher than a conventional loan
- Very few lenders have this program. Let us help you
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What Size Deposit Will You Need
Nowadays if you are looking to buy a house you always need to put down a deposit. It will be impossible to get a 100% mortgage. However even if you have been bankrupt in the past, given you wait long enough this should not present too much of a problem.
Once the record of bankruptcy has come off your credit file, you should aim to put down a deposit of 10% of the value of the property. There may be a lender who is willing to consider a smaller amount, but they will not accept less than 5%.
Of course the larger amount you can put down, the more mortgage options you will have. If you are a 1st time buyer looking to buy a newly built home you may also be able to get help from the Government. The help to buy scheme lends you up to 20% so you will only need a 5% cash deposit.
As a rule of thumb you will only be able to borrow up to 4.5 times your gross salary. This is to ensure your mortgage is affordable.
If I Get Accepted For A Mortgage Can It Still Be Declined
Generally, if a bankruptcy was discharged more than six years ago, this should not show up on your credit file. However, there is a database called the National Hunter that holds details of people who have experienced bankruptcy.
When you apply for a mortgage, you might pass all of the initial checks but then when you submit your full application, the lender could check the Hunters Report and then decide to decline your mortgage application.
This is why it is a good idea to choose a mortgage broker who will review your specific circumstances to identify a lender that will accept your application, if there is one available.
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Can You Get A Va Home Loan After Bankruptcy
Its possible to buy a house after bankruptcy, and yes, VA loans are available after bankruptcy, too. In certain circumstances, VA loans may be easier to obtain than other loans . Active and retired military services members may still qualify for VA loans, but eligibility will depend on a handful of factors:
- The type of bankruptcy youve filed
- The reason youve filed for bankruptcy
- Your ability to meet standard VA eligibility requirements
Can I Get A Mortgage After Bankruptcy
Yes, despite what you may have heard to the contrary, it is indeed possible to get a mortgage after a bankruptcy.
As with any type of bad credit, bankruptcy can cause real problems with many mortgage providers, who just decline anyone whos ever had one. The good news is that there are a handful of mainstream lenders that are happy to consider mortgages for people who have been bankrupt.
It may be possible to get either a conventional mortgage, a buy-to-let mortgage, a second charge mortgage or a bad credit remortgage with a bankruptcy on your file, under the right circumstances. Read on to find out exactly what they are.
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I Have A Bankruptcy And A Foreclosure How Does That Work
It is not uncommon to be going through bankruptcy while also having a mortgage. You may choose to reaffirm the mortgage and keep the property. Or you may choose to include the mortgage in the bankruptcy. In that case, your obligation to the mortgage lender ends, and so do your rights to occupy the property.
However, it can take some lenders years to actually foreclose on these homes. Should you be afraid of restarting the clock if your bankruptcy waiting period is up, and then the lender finally forecloses?
If you did not reaffirm your mortgage and did not continue to make payments, but did continue to live in the home, that foreclosure will probably be considered a separate and later event. And your wait to buy again starts over, and it will be longer.
If you cant pay your mortgage when you go through bankruptcy, make sure its included in the bankruptcy and you agree to return the property to the lender. If the bankruptcy documents absolve you of responsibility for the mortgage, the lender applies the shorter postbankruptcy waiting period when you apply for a new loan.
But if the foreclosure is unrelated to the bankruptcy and occurs later, the lender applies the longer postforeclosure waiting period. In the case of a conforming lender, thats seven years following the actual foreclosure, not the bankruptcy.
Could I Be Eligible For A Buy To Let Mortgage After Bankruptcy
Yes, there are lenders out there that may grant you buy to let mortgages.
To get a buy to let mortgage you often need to meet the following conditions:
- Have excellent credit since being discharged, with a credit report to prove it
- Discharged for at least 3 years
- Be able to put a 15% deposit down on buy to let mortgages
So, even if you are someone with bad credit, mortgages are still an option.
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Dealing With Your Vehicle
One of the forms you will file with the bankruptcy court is called the Statement of Intention. In this form, you tell the court what you plan to do with property that is securing a debt you owe, like real estate or a vehicle.Ã
If you own your vehicle but are still paying on the loan, you have a few options on how to deal with it in Chapter 7 bankruptcy.Ã
Reaffirmation
You can reaffirm the debt, keep your vehicle, and continue making payments. This means the debt will not be discharged and you will continue making monthly payments during and after bankruptcy. If you miss future payments the lender will have the right to repossess the vehicle and possibly try to collect on any deficiency between the balance you owe and the amount they get when selling the vehicle.
If you select this option in your Statement of Intention, your car lender will send you a reaffirmation agreement for you to complete and return. In some bankruptcy cases a reaffirmation hearing will be scheduled.
Surrender
If you choose to surrender your vehicle, then it will be repossessed and the debt will be discharged in your bankruptcy. Filers with high car payments they canât afford often choose to surrender their car to get out of the debt.Ã
Redemption
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Getting A Mortgage After Bankruptcy
You may not be able to get a mortgage during bankruptcy, but you can get one after bankruptcy if you otherwise qualify. Nonconforming loans like those from government agencies may not even have a waiting period.
The following sections will go over what you need to know if youre trying to buy a new house or refinance your current home after a bankruptcy.
Before we get into specifics around guidelines, its also worth noting in general that a bankruptcy of any kind has a major negative impact on your credit. Its not impossible to move forward and get a mortgage down the line, but you may have some recovery to do. A secured credit card or credit builder loan can help. Check out this post on buying a house with bad credit.
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Bank Statement Mortgage Loans
Bank statement mortgage loans, also known as self-employed mortgages, allow you to secure a mortgage without the documentation you would normally use to verify your income .
If you have gone through a bankruptcy, it may be difficult to come up with the required documentation, particularly if you are a self-employed real estate investor. Under these circumstances, bank statement loans may be a good alternative.
Youll use 12 to 24 months of bank statements to present your financial picture and ability to repay. Bank statement loans often allow high debt-to-income ratios and high mortgage loan limits. They can be used on primary residences, second homes, and investment properties.
Buying A House After Bankruptcy: What You Need To Know
*As of July 6, 2020, Rocket Mortgage® is no longer accepting USDA loan applications.
Do you have a bankruptcy on your record? If so, it can feel like youll never be able to return to financial normalcy. However, the truth is that bankruptcy isnt a permanent black mark on your credit report. Its even possible to buy a home after bankruptcy if you know which steps to take.
In this article, well take a closer look at how to buy a home after bankruptcy. Well also show you how long you need to wait after filing to apply for a loan, and how you can maximize your chances of success.
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If You’re Homeless Because Of Bankruptcy
If you risk being made homeless because of bankruptcy or it’s already happened to you, you should contact your local council as soon as possible. They will consider your circumstances to see if you’re eligible for help with re-housing.
Tell the council youre homeless because of your bankruptcy. If you lose your home because of financial problems, the council shouldnt decide youve made yourself homeless – called being intentionally homeless.
Which Lender Can I Apply To With Bankruptcy On My File
There are a few discharged bankrupt mortgage lenders in the market. Whilst some are mainstream lenders offering high rates and overlooking discharged bankruptcies of over 4 years, there are other specialist lenders who can take on applications for bankruptcies discharged less than 3 years ago but these do tend to have higher rates and fees attached to them. Get in touch with one of our experts and we will help establish the best lender for you.
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Can I Buy A House 1 Year After Chapter 7 Discharge
In most cases, theres at least a two-year waiting period from your Chapter 7 discharge date until you can be approved for a home loan.
There are some limited circumstances in which you can obtain a loan after one year from the discharge, explains Andrea Puricelli, production resources engagement manager for Inlanta Mortgage.
But thats only if the bankruptcy was caused by extenuating circumstances beyond your control and youve since exhibited an ability to manage your financial affairs responsibly.
Such extenuating circumstances could apply if you were forced into bankruptcy due to a serious illness or major job loss or income reduction.
But in most cases, it takes more than a year to recover after declaring bankruptcy. So most home buyers will have to wait two years or more before applying anyway.
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Should I Wait Longer Before Applying For A Mortgage After Bankruptcy
This depends on your specific situation, as you might be able to get a mortgage without paying a very high interest rate.
Even if you are paying a high interest rate on a bankruptcy mortgage, you might be in a better financial position by buying a house instead of renting, for example.
If you want to find out more about getting a mortgage after bankruptcy, contact our whole-of-market mortgage advice team and we can discuss your options. Boon Brokers is a fee-free whole-of-market mortgage and insurance brokerage.
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How Do You Qualify For Mortgage Default Insurance
As of July 2020, borrowers must meet the following criteria to be eligible for mortgage default insurance coverage:
Maximum amortization of 25 years This is the length of your initial mortgage term. While longer terms are available, they would require at least 20 percent down to avoid the mortgage default insurance requirement.
Gross debt service ratio of less than 35 percent This measure is calculated by dividing your total household expenses by your total household income.
Total debt service ratio of less than 42 percent This measure is calculated by dividing the sum of your anticipated mortgage payments, property taxes, and other debt payments by your gross household income.
Your is a numerical representation of your overall creditworthiness. You can check this number for free through many online banking services and credit bureaus, or for a fee through several third parties.
Must not borrow money for their down payment You must demonstrate youre financially capable of saving toward your real estate purchase, and only your mortgage provider may have security in your amortization.
Can I Qualify For A Mortgage After Declaring Bankruptcy
Bankruptcy is one of the most difficult things that anyone can go through. And it can make it seem as though applying for a mortgage after declaring bankruptcy is an impossible dream that will never come true.
The short answer, however, is that you can still qualify for a mortgage after declaring bankruptcy. But it is important to understand bankruptcy, what it is there for, and what it means for you to declare.
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Lock In Your Mortgage Rate
Since interest rates change on a daily basis, you should try locking in your mortgage rate once you complete your application. This will protect against interest rate fluctuations and can help you better plan your finances.
Most lenders allow you to lock in your interest rates for 30-60 days. If you go past the 60-day mark, you might have to pay an additional fee to keep your interest rate locked in.
Why Use A Mortgage Broker
Mortgage brokers can help you find the best deals on the market not just from one lender. With a broker youll get:
- Valuable knowledge, through years of experience helping customers to find mortgages
- An improved chance at finding a mortgage, some mortgages are only available through a broker
- Help with the application process, as usually just one application can be used across various lenders
- Advice on how to improve your chances, for instance getting a guarantor or applying for a joint mortgage
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What Is An Iva
An IVA is a legally binding arrangement between you and your creditors. Its a type of insolvency that means an agreement has been reached with your creditors that allows you to pay off debt at an affordable rate over a period of time.
An IVA is not available or suitable for everyone, as you need a sustainable ongoing income source and it is only for unsecured debts. This means that it is suitable for credit cards, outstanding bills, personal loans, payday loans and arrears with utility suppliers, but secured debts like mortgages, of student loans and child support would have to be paid separately.
As its a form of insolvency, an IVA has a negative impact on your credit file and financial situation. At Simply Adverse we can help you with mortgage applications if youve had an IVA.
