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Can I get a Mortgage as a Discharged Bankrupt?

So you have experienced a bankruptcy and have been told to wait at least six years prior to applying for a home loan. Waiting six long years without any guarantee of being approved for a mortgage after bankruptcy can be disheartening. Fortunately, this advice no longer holds true.

Today, there is a growing awareness of the need to offer home loan products that are specifically designed for borrowers with an imperfect credit or financial history. There are mortgage programmes that have been specially created for borrowers who have gone through a bankruptcy. In fact, those with a bankruptcy discharged for even one day may apply for a home loan. Believe it or not, if your bankruptcy was discharged yesterday, you can qualify for a mortgage today!

You are probably thinking that although you are eligible, it will be difficult to qualify. The truth is that qualifying is much easier than you think. Bankruptcy is a tool to allow you to begin anew. It wouldn’t be an effective tool if it left you in a position where future loans were denied to you. However, your credit report needs time to recover. Your official discharge from bankruptcy is typically a year later, but the report will hold onto the details for a further six years.

What is important and what will be looked at is your credit score. For sure, your credit rating will make you a less attractive prospect for potential lenders, so you need to rebuild your credit as soon as possible. This is a crucial part of recovering from bankruptcy. You need to understand that the type of bankruptcy you filed will decide the amount of time it stays on your record. Although there is an amount of time that creditors will see that you have a bankruptcy discharge on your record, it does not mean that you will not be legible for credit. If you are applying for a mortgage while bankruptcy is still on your credit file, you will often be expected to pay a deposit of between 20-40% of the property’s value. The reason for this is because many adverse lenders limit the amount that they are prepared to lend at 60% of the property’s value, with just a few prepared to go as high as 80%.

You would then surely want to make sure you increase your chances of qualifying for a mortgage after bankruptcy, and it would be a wonderful start if you can correct your past mistakes first, learn from them and take necessary steps to rebuild your credit.

What are some steps to take?

Your first step in qualifying for a mortgage following bankruptcy, is to avoid applying for another credit. The last thing you want to do is getting involved in debt again after bankruptcy. And as you will learn, it would be difficult for you to obtain credit for around a year following bankruptcy discharge. Most lenders will want to wait for at least two years before they allow their bankruptcy discharge client to apply for a normal mortgage. In some cases, though, you can be able to apply for a mortgage after roughly eighteen months. This will all depend on your financial behaviour between the times of your bankruptcy discharge date until the time of your mortgage application.

The second step is to establish new credit accounts. This may sound scary, but if you do not make the same mistakes as you did before, everything will go on your favour. You will need to open new credit accounts to increase your credit scores. New credit accounts may involve opening a new major credit card, store credit card, automobile loan, and so on. And once you have secured obtaining these types of cards, you will need to do three things. These are, to always make your timely payment, maintain low balances, and payoff the balance each month.

Lenders will see that you are financially responsible if you manage your cards well and maintain regular and well-timed payments. Being financially responsible will allow you to be eligible for an unsecured credit card. Also, within two years you may have the privilege to get a normal mortgage or car loan. If you are thinking of applying for a mortgage earlier than the two-year period, you will have to search for a lender that can help you approve mortgages for people that had bad credit standing. Do not be surprised if you find out that this type of lender is asking for a larger deposit and has high interest rates (7-9% instead of the typical 2-3%), because that is the way it is. But if you really want it sooner than two years, then this type of lender is you best option.

If you have the patience, another option worth considering would be to wait for the years in which your bankruptcy still appears on your record to pass (6-10 years) and then apply for a mortgage. At this point, your bankruptcy will no longer appear on your credit file, and if your financial situation and behaviour has gone well, it would be worthwhile applying for a conventional mortgage.
In Conclusion,

Nowadays, with the competitive rates that are available on mortgages after bankruptcy programs, you are able to realize the dream of homeownership with a mortgage payment that is affordable and fits easily within your budget. Along with the traditional benefits of owning a home, such as equity building and tax benefits, you will most importantly be rebuilding your credit profile. Additionally, you may also benefit from the current strong housing market and its appreciating home values.

So, to the question: Can I get a Mortgage as a Discharged Bankrupt? the answer is yes. Now you know that you can qualify for a home loan today, what the credit requirements for a mortgage are, and that you can rebuild your credit and financial life through homeownership. You have worked hard to discharge your bankruptcy and have the fresh start that you were looking for.

There is empowerment that comes with the knowledge that you can purchase a home today even if your bankruptcy was just discharged. So get qualified for a home loan, start searching for a home and begin packing those boxes!
For more information, contact Independent Mortgage Brokers, they are leading experts in bad credit mortgage and offer valuable online mortgage advice. They also offer great mortgage advice for free.

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Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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