Finding a bad credit mortgage with fair rates and terms is important if you want to buy a house after going bankrupt. But with the help of online lenders, it is possible. You can quickly find a home loan with good terms if you compare different financing options.
How to Choose the Right Mortgage
If your credit score is less than 650, you will need to apply for subprime financing, which has rates that are a little bit higher than those for regular home loans. Traditional lenders and specialised lenders for people with bad credit both offer surprime loans. Choose a mortgage with an adjustable rate or one that only pays the interest to get the most money you can borrow. Plan on putting down at least 20% of the loan amount. This will lower your rates even more. You can also get lower rates if you have a lot of cash on hand or a low debt-to-income ratio. But the best way to find the best rates is to look into different lenders. Also, keep in mind that if you get a subprime loan, you don't have to pay for private mortgage insurance, even if you have less than 20% equity.
Before you begin to look,
Get a copy of your credit report before you start looking for a subprime mortgage. Check it to make sure that your bankruptcy information is correct, and then use it to get loan quotes. So, lenders won't have to look at your credit report, which will hurt your credit score even more.
Getting a good deal on a mortgage for the future
When you start comparing mortgage offers, make sure the terms are good for your future financial goals. If you want to refinance when your credit score gets better, check to see if there are any fees for paying off the loan early. This is also helpful if you move before paying off the loan. Closing costs are another important thing to think about, especially if you plan to refinance in the future. If you don't plan to keep the loan for at least seven years, it doesn't make sense to pay extra thousands for a slightly lower rate. Even though the interest rates are lower, you won't save any money. So, look at the APR to get a general idea of how much the loan will cost in total. But then look at how the closing costs and interest rate are broken down to find the best financing for you and your finances.
