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Alternative Mortgages

May 27, 2008  |  Difficulty: Easy

Path to mortage
Those “A-list” lenders may not want you after bankruptcy. But that is ok. Why? Well, there are other lenders. The “B, C, and D” lenders- or the lenders with alternative mortgages- are willing to be your lending source. These lenders are more than willing to help you out, but this help comes with high price tag, inflated fees and rates.

When you walk through the door of an “A-list” lender, nothing that you say matters. The only thing they want to know about you is your credit score. When they see your bankruptcy, they will most likely send you packing, because you are then seen as a huge financial risk that they are not willing to take. “B, C, and D” lenders, however, are willing to take the chance, thinking that the inflated rates and fees compensate for the risks taken.

When dealing with “B, C, and D” lenders you will find that the underwriting regulations are very precise. The underwriting regulations are dependent upon the type of loan you are seeking. So, if your loan application shows that you don’t meet the minimum requirements, then you will be turned away.

Don’t feel too discouraged if one lender rejects you. You should make it a point to look at several lenders anyway. You could get a better deal with a lender who actually wants to do business with you. You may find that the lender who has turned you away requires a 20% down payment, no late payments on your current rental/utility history and a credit score that is at least 580. But you see that another lender is willing to take you in. The requirements are basically the same, the only difference is that your credit score can be as low as 560. This program is pretty reasonable just like the other, but this one fits you better. 

It can take a lot of footwork to find a mortgage loan company who will deem you as an eligible customer. To lessen the work involved, you can seek the help of a mortgage broker who specializes in giving bankrupt homebuyers alternative mortgages. The mortgage broker will fully assess your financial information and then search for an “alternative” lender who is willing to accept your application and respect you as a customer.

It is also good to remember that the type of bankruptcy you have will make a difference. Chapter 13 bankruptcy means that you have negotiated reasonable terms for repayment of debt. This type of bankruptcy will help to re-build credit over time. Chapter 7 bankruptcy means that you have dismissed all debt, and thus it will be harder to regain satisfactory credit.

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