My name's Scot King, and I'm a licensed mortgage broker for Pacific West Capital here in California. My firm is approved with over 150 lenders many of which deal in subprime loans. In a nutshell it works as follows:

If you had bankruptcy discharged, either a Chapter 7 or a Chapter 13, in the last 12 months, and you know for a fact that your middle credit of the three credit reposotories (i.e. Experian, Transunion, and Equifax) is above 580, you may qualify for 100% financing, that's right, that's no money down financing! You will be required to verify your income with documentation, and your housing payment history must be good for the last 12 months. You must show that you have not been over 30 days late on any mortgage or rental payments. Proof of this is shown via cancelled checks front and back. If you rented from an apartment complex, a verification of rent (VOR) is usually acceptable. If you had a private landlord, it gets a little more tricky. I have a lender who does not require any VOR but you do need to have a qualifying tradeline or two. So, if you put everything into the Chapter 7 or Chapter 13, and didn't maintain any accounts, we may need to use an alternative tradeline. This can be done if you have a cell phone bill, a utility bill, or a similar account which you know that you have always paid on time with for the last 12 months. Again, this needs to be documented for the underwriter with either cancelled checks or possibly with a statement from the creditor showing a history of payments and when they were applied to your account.

The key to obtaining the no money down financing is your credit score. It can be the very day after your bankruptcy has discharged as long as you have the score, which again is a 580 plus. After a bk discharge, it is common to see scores drop down into the 500s and sometimes below 500. If you also had a foreclosure within the last twelve months, the no money down financing can still be done, but the pricing isn't too pretty. You have to sort of take what you can get and get your foot in the door. As long as you make your payments on time for usually 2 years, depending on when your bankruptcy discharged, or when you had your foreclosure, you can refinance out of the loan into something better at a later time.

Another thing to keep in mind is that this is only for stick built homes, (i.e. single family residences, condos, townhouses, and modular homes) No Manufactured homes. The financing is accomplished either by doing one loan at 100% of the purchase price or with an 80/20 combo. The 80/20 usually beats the one loan by about 1% in interest and it goes to those individuals with the scores under 600.

If you are short on cash for closing costs, the seller may contribute up to 6% of the purchase price a credit towards your closing costs (non-recurring). It's always good when you can come in with at least something of your own. Usually you will be required to do this for some of the prepaid expenses including interest,property taxes, and hazard insurance.