Despite the fact that bankruptcy is recognized as the most damaging financial status to be given, it is not the final nail in the coffin that so many people believe. In fact, even when applying for home loans with bad credit, bankruptcy does not have such a large influence.
Of course, this is not to say that the credit history of an applicant for a home loan is simply ignored. There are definite consequences to having poor credit scores, but it is important to note that bad credit home loans after bankruptcy are no fantasy story - they are real and, with a properly prepared application, can be secured.
Still, the consequences of being declared bankrupt includes high interest rates, low loan limits and generally inflexible repayment schedules. However, in being able to get home loans approved after bankruptcy, many applicants are willing to accept these terms. It is worth noting that there are choices here too.
Why Lenders Will Overlook Credit Scores
It might seem strange that lenders that are looking at an application should pay little attention to the credit score an applicant has. There are a number of reasons why this is the case, though the core lies in that fact the bad credit does not always mean bad creditor. Those seeking home loans with bad credit are not always the high risk their score might suggest.
Bankruptcy should suggest that the lender avoid that applicant (and many do). But lenders know the reason why a person gets into financial trouble is not always irresponsible money management, so bad credit home loans after bankruptcy can still be a viable deal.
For example, the economic downturn can force a business to close. The courts can deem the owner bankrupt, but in truth it only came about because of the state of the economy. In such cases, it is possible to get home loans approved after bankruptcy because the original problem was out of the hands of the applicant.
Finding the Right Lender
With this in mind, the only real issue for those applying for home loans with bad credit is to find the right lender offering the best mortgage deal. While bad credit loans are generally available from traditional lenders, their terms tend to be very poor. Interest rates can be very high, with the value of the loan generally remaining low.
However, online lenders tend to be much more accommodating when it comes to approving bad credit home loans after bankruptcy. This is because, generally, online lenders do not really care about credit ratings. All that is needed is proof of employment, confirmation of income and bank details confirming a live account.
The reason this criteria is so straightforward is that funds are transferred electronically into the bank account, while the monthly repayments are also taken from the account directly. And so long as the income is large enough to cover the repayments, home loans approved after bankruptcy is not a great problem.
Steps to Improve Chances
Of course, improving your credit rating is also a major help to securing a home loan with bad credit. This can be done by seeking a review from the credit agency, and having any discrepancies corrected. Also, before applying for bad credit home loans after bankruptcy, a series of small personal loans can be secured and repaid in full, which also increases the rating.
Seeking out a cosigner can help to improve the confidence of the lender, with many home loans approved after bankruptcy actually dependent on a cosigner.
Of course, the key point is that a home loan with bad credit can be secured, even after bankruptcy, which is a major boost to efforts to regain a strong financial status.