In general terms, a discharged bankruptcy means that an individual is no longer bankrupt. While restrictions that existed during the bankruptcy period don’t apply anymore, your credit history will still show that you were once bankrupt. This can make securing a home loan from banks and other major lenders challenging. If you do secure a loan, you may pay a higher interest rate than a borrower with no history of bankruptcy. Here are some tricks to help make the application process more manageable.
Improve your credit
To help increase your borrowing power and improve your chances of securing a home loan, you need to have a good credit score. Even after bankruptcy, you can improve your credit score by paying all of your bills, utilities, rent and other expenses on time.
Apply to one lender at a time
Lenders can access your loan application and enquiry history. When an application is denied, it is added to your credit file. The more denials you have, the harder it is for you to secure a loan. Instead of applying to many lenders, it is essential to be selective and find a lender who will meet your needs and will seriously consider your application.
Increase your savings
The best way to show lenders that you are a worthy borrower is to start saving. Most lenders, including non-conforming and specialist lenders, require a deposit of 14-16% with a discharged bankruptcy. However, if you can prove that you have started the process of saving and can make regular repayments, your value as a borrower increases which can improve your chances of receiving a home loan.
Apply with a specialist
Most banks and traditional lenders are reluctant to approve a loan application from an individual with a discharged bankruptcy. However, some lenders specialise in bad credit.
Mortgage Street is one such specialty lender. Our team of brokers can assess your financial situation and find a lender with the right loan for you. We may be able to help improve your credit, allowing you to refinance later on.