1. Apply With at Least 3-4 Mortgage Companies - Compare offers. Subprime mortgage borrowers are at the highest risk for excessive mortgage fees, inflated interest rates and other unethical mortgage practices.
2. Consider a Down Payment - When you apply for a new home loan, there are only a few factors that weigh heavily on your approval. Some of those factors are credit, income, debt-to-income ratio, employment history and down payment amount. If your credit is weak, you will need to really strengthen those other factors. Consider creative ways to come up with even a small down payment of around 2-5%. That might be enough to get you a better approval.
3. Consider Waiting to Apply Past the 2 Year Mark - Home mortgage lenders typically are more willing to lend to people with a past bankruptcy when they have past the 2-year mark from the date of their bankruptcy discharge. If you are close to that date anyway, consider waiting. After the 2 year mark, most lenders are willing to work with people with a bankruptcy.
4. Watch Out For the PrePayment Penalty - Most subprime mortgage lenders will tack on a prepayment penalty to the loan. If you are ok with a prepayment penalty and the loans interest rate is not too high, make sure the penalty is for a reasonable amount of time. It should be somewhere between 6 months to a year. If your penalty is for 2 years. Make sure that your interest rate is one you can live with for the entire 2 years. The penalty is usually the equivalent of 6 months of interest payments.
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