When You Are Ready to Apply for a Mortgage
Again, waiting helps as long as you're following the above advice on setting a positive credit record. Your first and best targets are quality conventional lenders as well as independent mortgage bankers and mortgage brokers who represent quality borrowers in your market.
Even still, there remains the possibility that you might not qualify with the top players in your market. A good mortgage broker can help you find lending sources you might not be able to find on your own. For example, they might be able to coerce a conventional lender to work with you even if you've had the door shut in your face before. Also, they'll know the best possibilities in the so-called “alternative loan” market. These are lenders who provide financing for people who can't quite qualify for loans in the conventional market.
Here's what you should expect to learn from lenders who come back interested:
Always ask about points and other fees that might be attached to the loan. And even if it makes you nervous, ask your broker how much money she is making on such a loan. You haven't killed anybody, you've just filed bankruptcy. If she's not straight with you or makes you feel unworthy, find another lender.
Be prepared for an eye-popping rate. If conventional mortgage rates are at 6 percent, don't be surprised if you get a quote between 5 and 10 percentage points above that. Even if you have sworn to be creditworthy in your heart, lenders don't see you that way. They see you as risky, and they're going to make a buck off of you. It's just that simple.
Want a better deal? Scrape up a higher down payment. This may be pretty tough after you file bankruptcy, but it's one of the few ways you can negotiate better terms.
Post-bankruptcy borrowing is a wake-up call, but the time to start preparing for it is the minute you file. Everything you can do to repair your credit going forward will make the borrowing process easier.
