Dealing With A Past Bankruptcy On Your Credit Report
A bankruptcy will stay on your credit report for seven to ten years. However, it stops affecting your credit significantly after two years. So if you have established other good credit habits, you can qualify for market rates in no time.
But before you shrug off your bankruptcy, check your credit report to be sure that all accounts that were part of your bankruptcy are discharged. It's not uncommon for paperwork to not get processed, leaving a negative mark on your report.
Other Helpful Factors
A down payment of 20% is expected for conventional rates with a traditional loan. Anything less and you will have to either pay a point or more at closing or additional loan interest. The same is true with sub prime loans. However, larger down payments decrease your rates.
Significant cash reserves and a large income can also offset your credit risk. The amount you want to borrow is also a factor. The lower your debt to income ratio, the better score you will get.
It's also important to remember that not all lenders will treat your application the same. So it's important to shop around for the right mortgage with the right terms.
Shopping Mortgage Lenders
If it has been less than two years after your bankruptcy or you know you have poor credit, start shopping with a sub prime lender. They deal primarily with people who have adverse credit. They can also offer you a lot more options than a traditional lender.
For instance, sub prime lenders have easier terms to qualify for a zero down mortgage. You can also opt for a future refinance with your mortgage when your credit score improves.
Remember that you have many financing options for a mortgage, even with a bankruptcy in your past.
