How to Get Financing after Filing Bankruptcy
By Jeanette Joy Fisher
you're thinking about buying a home but have declared bankruptcy
in the past, don't give up hope. There are still ways for you
to be able to find a loan, even if your credit history is less
Lenders make various kinds of home loans, normally graded from
"A" all the way down to "D." The more problems
that show up on your credit report--slow pays, late pays, or even
bankruptcy--the lower the grade of loan you'll be able to qualify
for. If you're employed and have a relatively good income, you'll
get better terms, even though you won't qualify for a "Grade
A" loan. The longer you've been at your current job, the
better, because it shows stability.
Here are some general rules about the qualifications lenders look
for before giving consumers the various grades of home loans:
To qualify for an AA loan, lenders must see no late payments or
any other difficulties when they look at your credit history for
the past two years. First, we'll look at the top of the line loans,
all in the A grade category.
To qualify for an A+ loan, you can only have one late payment
in that two-year time period. An A- loan is available to borrowers
whose credit report shows two or three late payments, and have
at least two credit cards. Borrowers in the A category will normally
be qualified for all the various perks that lenders offer, such
as low interest loans and low down payments.
But if you've had a bankruptcy in the past, you're choices are
more limited, and you'll generally need a larger down payment.
For instance, a grade B loan can be obtained by borrowers who've
been at their jobs for a reasonable length of time in as little
as 18 months after declaring bankruptcy, assuming that they've
been able to reopen at least one line of credit during that time
and kept it current. Usually the lender will require 15% down,
and the best interest rate the borrower can generally get is 6-7%.
A grade C loan will require good, steady employment, and may be
available within a similar time frame as a B grade loan. The interest
rate is generally higher, currently at about 8.5%, and the down
payment requirements are considerably higher. For instance, a
lender will normally require 20% down on $300,000 house or 40%
down on a $500,000 home.
You'll need a significant amount of down payment to qualify for
a grade D home loan, as well, and the interest rate will normally
run between 9.8-10.7%, depending on your overall credit score.
If you're employed and your credit score is above 500, you can
put down as little as 30% on a $300,000 home or 45% on a $450,000
house. If you're self-employed, however, you'll need 45% down
just to buy a $250,000 home.
If you're hoping to purchase a home, talk to your local lender
to see what their criteria are for their various grades of loans.
Even if you've had a bankruptcy in your past, that doesn't mean
you can't buy a home. It just means it may take some time, you'll
need to establish a strong employment history, and you'll need
to save more money for a down payment than if the bankruptcy hadn't
(c) Copyright 2004, Jeanette J. Fisher. All rights reserved.
Forget what you've been told about credit. Get the Credit You
Need to Buy Real Estate. Visit Real Estate Credit Help Center: