This is a detailed guide on the best Mortgage Lenders for Bankruptcies.
Securing a mortgage after bankruptcy can be very difficult but it is not impossible.
There are many Mortgage Lenders For Bankruptcies who are willing to lend to individuals who filed for bankruptcy but they must adhere to the guidelines and meet the eligibility criteria.
Moreover, there are some important things you need to know before applying for a mortgage to avoid getting rejected.
All those things are incorporated in this article, read to the end to know the best mortgage lenders for bankruptcies.
What is bankruptcy?
Bankruptcy is the legal procedure whereby a person or business experiencing financial hardship and unable to pay their debts to creditors receives debt relief.
Those who file for bankruptcy are always given options to either sell their assets to repay the debt or create a repayment plan.
There are different types of bankruptcies; they are usually referred to by their chapter in the Bankruptcy Code.
1. Individuals may file Chapter 7 or Chapter 13 bankruptcy, depending on their problems.
2. Municipalities may file under Chapter 9 to reorganize.
3. Businesses may file bankruptcy under Chapter 7 to liquidate or Chapter 11 to reorganize.
4. Chapter 12 provides debt relief to family farmers and fishermen.
5. Bankruptcy filings that involve parties from more than one country are filed under Chapter 15.
Types of home loans available after bankruptcy
Below are the different types of home loans available after bankruptcy
The Veterans Affair loan
The VA loan is a zero-down payment mortgage loan available to veterans, service members, and selected military spouses issued by mortgage companies or banks.
The VA loan was created to assist returning service members to purchase homes without down payment or credit score.
To be able to access this loan after bankruptcy, you must complete your two years waiting period after filing for bankruptcy, meet the eligibility criteria as a veteran, and meet the minimum income requirement.
If your credit score is low, it might prevent you from getting a mortgage, therefore you need to raise your credit score after bankruptcy to be qualified for a mortgage.
To be eligible for a VA loan, you must have:
1. Served 90 consecutive days of active service during wartime.
2. Served 181 days of active service during peacetime.
3. Have 6 years of service in the National Guard or Reserves.
3. You are the spouse of a service member who died while on duty or as a result of a service-related disability.
FHA Loans
FHA loans are very considerate, people with a history of bankruptcy for at least two years can apply for FHA loans the same they would without bankruptcy.
However, if the bankruptcy is less than two years old, the FHA loan application process will be backed up with extra documentation to prove you have a genuine excuse for your bankruptcy.
The FHA Mortgage interest rates do not increase because of your bankruptcy status rather, they are influenced by your credit scores.
FHA provides mortgage programs with flexible requirements which makes it easier for most borrowers to qualify.
Those with a history of bankruptcy or foreclosure are qualified to apply for an FHA loan as long as they have a good credit score and good payment history.
To be eligible for this loan, you must have two years waiting period first after filing for bankruptcy, have a sustained history of employment, etc.
USDA Loans
The USDA home loans assist qualified lenders to provide low and moderate-income households the privilege to own decent, safe, and clean homes in eligible rural areas.
The program offers a 90% loan note guarantee to qualified lenders to reduce the risk of extending 100% loans to eligible rural homebuyers.
Government Streamline
Many government programs now enable homeowners possessing current government-backed mortgages to streamline the refinancing process.
The process enables homeowners to reduce their payments and interest rates when they are refinancing their house after bankruptcy.
Portfolio Loan
Portfolio Loans are mortgages that allow borrowers to receive home loans after bankruptcy. These loans are not sold to Fannie Mae or Freddie Mac or agencies like FHA, VA, or USDA.
Jumbo Loan
A jumbo mortgage exceeds the limits set by the Federal Housing Finance Agency (FHFA). It enables you to search wide while in the process of buying a house after bankruptcy.
Unlike normal mortgages, a jumbo loan is not permitted to be purchased, guaranteed, or examined by Fannie Mae or Freddie Mac.
Factors that can stop you from getting a Mortgage after Bankruptcy
Below are the top factors that can stop you from getting a mortgage after bankruptcy.
Credit Score
The credit score is one of the main factors that can stop you from getting a mortgage after bankruptcy. It is a numerical rating that scales an individual capacity to repay a debt. It always ranges from 300 to 850.
Foreclosure/Short Sale
If your home has been recently seized and put up for sale by an investor or bank, it might affect your chances of securing a mortgage.
Late Payments
Late payment can prevent you from getting a mortgage after bankruptcy. Make sure that you do not delay your payment.
It’s best to turn in your FHA loan application when you have a solid 12 months of on-time payments for all financial duties.
Current Home Condition
If your house is in a dilapidated state, you might not be able to get a mortgage after bankruptcy.
So you need to take care of your current home so that you don’t lose out when appraisers come to inspect your home
Lack of Money in Savings
Lack of adequate savings can prevent you from securing a mortgage after bankruptcy. Make sure you have adequate money in your savings for a down payment as well as a reserve fund before you think of applying for a mortgage.
Previous Employment History
Having a good employment history will boost your chance of getting a mortgage after bankruptcy.
Liens of Title
After completing your bankruptcy plan, liens of title should be removed from your history before planning to secure a mortgage.
If it is not removed, you may find it difficult to get a mortgage and it may affect your interest rate too.
How to Prepare For a Mortgage After Bankruptcy
If you want to secure a mortgage after bankruptcy, below are the ways to prepare for it to get it fast.
1. Rebuild your credit to your lender’s minimum credit score and history requirements.
2. Open a secured credit card account so you pay in advance an amount equivalent to your credit limit as collateral.
3. To secure a mortgage you need to have a history of different types of debt, Therefore, apply for an unsecured card so you can show responsibility in paying your debts.
4. Show that you can handle debt responsibly by paying your old debt with speed and avoid accumulating more debt if your debts were discharged.
5. Make your monthly payments on time.
6. Write a detailed letter of explanation about your bankruptcy, and submit it with your mortgage application when you request preapproval.
7. Once you have been given a preapproval letter, attach a copy of it to any offer you make on a house, it will show how serious you are about your offer.
8. Make yourself readily available for lender’s interview, and be genuine about your finances, both past, and present.
Best Mortgage Lenders For Bankruptcies
There are numerous mortgage lenders for bankruptcies but below are the best mortgage lenders for bankruptcies you would enjoy doing business with.
1. Peoples Bank Mortgage
Peoples bank has a department committed to helping borrowers get a mortgage after bankruptcy.
Their chapter 13 bankruptcy division offers mortgages immediately after a borrower has completed the chapter 13 bankruptcy plan.
They offer prime loan options such as FHA, VA, and USDA to all qualified borrowers with no waiting period after Chapter 13 discharge. All these options have low down payment options and cash-out refinances.
Peoples bank mortgage is one of the best mortgage lenders for bankruptcies; they provide great assistance to those buying or refinancing a house after a bankruptcy.
However, they offer Non-prime options too which include zero seasoning requirements for foreclosures and 12 months’ seasoning on bankruptcies.
Credit score requirements for non-prime options are as low as 620, and loan amounts are available up to $3,000,000.
2. Midland Mortgage Corporation
Midland mortgage corporation offers bankruptcy-friendly programs such as FHA loans. They help borrowers secure the best rates for their mortgage.
However, to be eligible for this mortgage, you must file chapter 13 or 17 and complete your timely payments.
You must also rebuild your credit report after filing bankruptcy before you apply for a new loan.
Moreover, if you don’t know how to go about it, Midland mortgage has tips to help you clear up your credit, inspect your reports and fix inconsistencies.
3. Dream Home Financing
Dream Home Financing has been in the business of lending mortgages for bankruptcies for close to 20 years.
They help borrowers finance their home if they have recent Chapter 7 or Chapter 13 bankruptcy without the usual waiting period.
They can offer a mortgage after one day of a Chapter 7 bankruptcy or after just 12 payments during a Chapter 13 bankruptcy.
Credit scores for this mortgage are as low as 500 for Chapter 13 and mid 500 for Chapter 7. However, down payments and interest rates vary based on credit scores.
4. Acra Lending
Acra Lending is one of the best mortgage lenders for bankruptcies, it does not require any waiting period after a bankruptcy.
They are very lenient when it comes to the approval of credit scores, applicants with a credit score of 500 can still qualify for the loan.
Moreover, Acra Lending offers loan amounts up to $3,000,000, and the maximum LTV ratio they approve is 90%.
5. First National Bank of America
First National Bank of America mortgage rates varies for each borrower. Borrowers are always given the best rate they qualify for based on their eligibility.
Some key factors contributing to the difference in rate include occupancy, credit score, term of the loan, property type, amount of down payment, loan amount, and type of income used to qualify.
First National Bank of America requires a down payment for mortgages.
However, considering an individual’s qualifications, the down payment requirement may be between 15% and 35% of the purchase price.
This bank offers mortgage loans without a waiting period after a bankruptcy, and they have flexible income and credit qualification guidelines.
6. ACC Mortgage
ACC Mortgage is one of the best mortgage lenders for bankruptcies. It offers what they refer to as a “Second Chance Purchase Program”, which allows borrowers to secure a new mortgage immediately after a bankruptcy is discharged.
Another great aspect of this mortgage program is that it offers 620 minimum credit score requirements and up to 85% LTV.
7. Angel Oak Mortgage Solutions
Angel Oak Mortgage Solutions is one of the best mortgage lenders for bankruptcies.
Its Bank Statement program provides a loan solution to help deprived credit-worthy self-employed borrowers who otherwise would not be considered for a home loan.
It offers loans up to $3 million with a minimum of $150,000. It also offers two years seasoning for foreclosure, short sale, bankruptcy, or deed-in-lieu, and rates are 30-year fixed.
However, borrowers can own as small as 50% of the business for business bank statements and 25% for personal bank statements.
8. Rocket Mortgage
Rocket Mortgage is an online mortgage lender and does not have offices that are open to the public, it guides its clients through every stage of the mortgage process.
Loans offered by Rocket mortgage include conventional loans, FHA loans (including FHA Streamlines), VA loans (including Interest Rate Reduction Refinance loans), and Jumbo loans.
Rocket Mortgage is appropriate for clients who have a credit score of 580 or above and are ready to purchase a home or refinance within the next few months.
9. Carrington Mortgage
Carrington Mortgage is very considerate, it lends mortgages for bankruptcies without strictly scrutinizing credit scores or the number of years of bankruptcy.
10. Citadel Servicing
Citadel Servicing finances loan just one day after a bankruptcy. Their credit score is as low as 500 and you can get a mortgage with a 10% down payment depending on your credit score.
Also see: Top Ten Mortgage Banks In Nigeria
That’s all on the best mortgage lenders for bankruptcies, I hope it helps.