Buying a Home Using Conventional Financing Following a Bankruptcy

If you lost your home in a bankruptcy, you might be wondering what you can do to improve your credit and buy again at some point down the road using conventional financing. Up until recently, FNMA required borrowers who had included their home in a bankruptcy to follow the foreclosure waiting period guideline of seven years before obtaining conventional financing. With the recent changes to FNMA guidelines, this is no longer the case—and you can now obtain conventional financing as soon as four years after the bankruptcy was discharged. The tips below will help you to rebuild your credit, to be in the best position to qualify with mortgage lenders in AZ.

Maintain Your Credit

Your qualifying debts were eliminated after filing bankruptcy. While lenders do allow for mortgage lending following a bankruptcy, they look very closely at a buyer’s credit report for what are referred to as “post-event derogatory credit”. Lenders understand that financial hardship which leads to bankruptcy is a reality. For potential borrowers with a major credit event such as a bankruptcy in their past, lenders want to see that the borrowers have recovered from that period of financial hardship. Once you’ve recovered, it is important to demonstrate that you have maintained your credit for a decent amount of time.

Pay Down Revolving Account Balances

Having one or more credit card or other revolving credit accounts with a balance that is close to the maximum credit limit can severely hurt your credit score. In order to get your credit score in the best possible shape try to keep you credit card balances below 50% of the available credit limit.

Save For a 5% Down Payment

Conventional mortgage loans require a minimum down payment of 5% of the purchase price; however, a larger down payment will help with your loan’s overall terms and costs. Mortgage lenders in Arizona can help you calculate the minimum down payment by using a conventional mortgage calculator.

Interest Rates

With conventional mortgage loans, the interest rates are typically higher than those of an FHA-insured mortgage loan are. However, it is important to consider all the factors when it comes to your loan. In most cases, the overall cost of conventional loans with mortgage insurance are lower than an FHA loan with mortgage insurance which may result in a lower overall cost to the buyer.

For all your home financing needs, turn to the mortgage brokers at Marquee Mortgage. With a combined 70 years of experience, the brokers at Marquee Mortgage can help you find the best financing options for your new home, no matter what your preexisting financial situation. Contact us today and schedule an appointment to help you get started on financing your next home.