Mortgage after Bankruptcy- Is it possible?

After filing bankruptcy, you need to wait for some time to get approval for loans. It is not easy to get approval as your credit score might have been affected greatly. If you have filed chapter 7 bankruptcy, you have to wait for a period of two years since the discharge of bankruptcy to apply for FHA mortgage, and you need to wait for 4 years to get eligible for conventional mortgages. If you have filed for chapter 13 bankruptcy, the period of waiting is 12 months after dismissal for FHA loans and 24 months after dismissal of conventional loans.

High interest rates for loans after bankruptcy

After the specified period of waiting, you can get loans easily if you maintain your credit report since filing bankruptcy. However, you should see to it that your financial dealings since bankruptcy reach the credit bureaus. It is not impossible to get mortgage loans before the specified time. But loans can be availed only from private lenders and the loan is sure to carry higher interest rates. If you want to get guaranteed loans for low interest rates, you need to make a huge amount of down payment. The interest type is determined by your financial behaviour since the discharge of bankruptcy. Loan to value ratio and the credit ratings are the prime factors that influence the interest rates for your loans.

Besides debt to income ratio and the credit ratings, your employment history, the loan to value of the home ratio and the down payment and the income are to be considered. If the credit score is not good, you need to take appropriate measures to improve the credit score and also take the necessary steps to keep yourself eligible for loans. The credit history is most affected after filing and discharge of bankruptcy. With chapter 13 bankruptcy, the impact is on your credit report for a period of 7 years and with Chapter 7 bankruptcy, it is there for 10 years. From the day one after the dismissal of bankruptcy, the credit score improves in par with the credit.

The prompt clearance of bills will improve the credit score and it might reach 600 or more even earlier than the stain gets off your credit report. When you get approved for mortgage against your property, you will be signing an agreement to the agreed terms and the documentation will be forwarded to the lawyer who is to prepare the mortgage document. When you submit your documents to apply for loans, you need to attach the bankruptcy documents. The documents related to your income and the affordable down payments should be presented. With higher down payments, you can expect to get loans for lower interest rates. The specifications for loan approval are same for all the applicants irrespective of filing bankruptcy.

The bills on all your cards and loans should be promptly paid off. Timely payments help to improve the credit score. You will be seen as the consumer who has reformed in a short time. Default on loans is considered very bad after filing bankruptcy and this act prevents you from getting loan approvals in future. You can avail the service of a local mortgage agent who can process your loan very quickly and who can offer personal services. There are online and offline lenders to give you the needed financial aid. The traditional lenders can be approached in person to discuss the options. lenders enable loan comparison and you can get options of of mortgages after bankruptcy. Understanding the features of these offers will help to make the choice as per your requirements and affordability.

Should You Apply For Pre-Approved Home Loan?

The increasing property prices across India and the desire for better living have meant that there are hardly any working individuals who can afford to buy an apartment without opting for a home loan.Taking a loan for buying a flat is after all not such a bad proposition as you get dual benefit of tax advantage and at the same time do not have to utilize your entire lifetime savings in getting a shelter for yourself.As per the guidelines issued by Reserve Bank of India (RBI), the loan to value ratio (LTV) for home loans of up to 20 lakhs is 90 percent, for home loans from 20 to 75 lakhs is 80 percent, while LTV for housing loans above 75 lakhs is set at 75 percent,proving to be a great help in your home buying process. The only dilemma that you face as a home buyer is whether you should opt for pre-approved home loan or applyfor it once you have your apartment finalized. Opting for a pre-approved home loan is a much better option and it has more advantages than drawbacks. However, all pros and cons related to pre-sanctioned loans should be carefully scrutinized before opting for it.

Advantages of pre-approved home loan

Allows you to plan your finances better

One of the important benefits of these loans is that you get to know your home loan eligibility in advance and can plan your finances better. In case your loan eligibility is lesser than your requirement, you can always add a co-applicant to increase your eligibility.However, it is important to note that all co-applicants should be co-owner of the property. The process of applying for these loans is also easy and most banks and financial institutions enable you to apply home loan online. Once the online application is done, their representative will come to your home to collect the required documents in order to analyze your credit worthiness. The list of documents differs on the basis of your employment, and mandatory documents required to be submitted for salaried individuals are different from self-employed and business owners.

Prevents you from unpleasant surprises

The other reason why pre-approved loans are so important is because they prevent you from getting aftershocks and unpleasant surprises. There is no fear of deal falling through as you already know your loan capability, the equated monthly installments (EMIs) to be paid and the down payment amount that you have to arrange for. You can search your property on the basis of your financial abilities. This goes a long way in expediting your home search process and makes the entire transaction easy, smooth and hassle-free.

Disadvantages of pre-approved home loan

Processing fees is generally non refundable

This could be termed as one potential drawback for pre-sanctioned home loan. However, it must be noted that the processing fees even though non-refundable is a minuscule amount. In addition to this, there are many banks that increase the validity of the pre-approved loan by few months to enable you to purchaseyour home. Also, not all banks charge the processing fee for pre-approved home loan.

Interest rates do not change

The other disadvantage with these loans is that the interest rates are fixed at the time of approval and do not be change if they fall when the loan is actually disbursed. This should not be an issue if you have opted for a floating rate home loan as the interest rates can be adjusted once the amount is released by the bank., in India the interest rates are not often changed by RBI in a hurry. So they neither fall norincrease within months and there is anappropriate method that is followed to give the retail customers enough head room to adjust to changing rates.

Conclusion – The pre-approved home loan come loaded with several discounts and benefits and play a key role in making your home buying experience pleasant and satisfying. Like any financial product, they too have their set of drawbacks.However, none of these would pose any major challenge to you and can be easily overcome. It is thus advisable to opt for pre-approved home loan to expedite your property transaction.