Applying For FHA Mortgage After Bankruptcy
An FHA mortgage is insured by the FHA, or the Federal Housing Administration. However, this mortgage it not given by the FHA, instead you have to approach a lender who is approved by the FHA to give borrowers FHA mortgages.
The beauty of this type of loan is that the onus falls on the FHA in case the borrower starts defaulting. This reduces the risk that the lender has to take, and makes it easy for the borrower to get approved for the loan.However, the main benefit of an FHA mortgage is the low interest rate. If you are looking for a single family home, you will have to make just a 3 percent down payment. This means that you will be able to buy a home that is priced higher. In addition, in case you want assistance with closing costs and mortgage insurance, FHA will help you.
The FHA has rules for the lenders. Lenders are not allowed to charge more than one percent as origination fees or charge a prepayment penalty in case the borrower pays off the loan before the term of the mortgage.
People who have had a recent bankruptcy can also avail FHA mortgages. However, if you want to apply for an FHA mortgage after bankruptcy, you will have to wait for 24 months in order to qualify. The lender will check what measures you have taken after your bankruptcy to ensure that your financial state is more stable and better. Therefore, in the 24 months waiting period, you should take steps to improve your creditworthiness.
Here are some things that you can do get an FHA mortgage after bankruptcy:
- Make sure you open at least three credit accounts after the bankruptcy
- Always pay your bills on time, or early if possible
- Make sure you work with the same employer for at least 2 years without changing your job
- Make sure that there are no adverse reports being sent to the credit reporting agencies on unpaid tax liens
- Before applying for the mortgage, make sure that you will be able to pay the monthly payments with any problems
In the 24-month waiting period, contact your mortgage lender and find out what are things you are required to do besides the above to qualify for an FHA mortgage. This way when the time comes to fill in the application, you would have managed to fulfill the requirements laid down by the lender for borrowers with prior bankruptcy record.
More Articles :