Many clients want to know what they will face if they want to buy a home after filing for bankruptcy—be it Chapter 7 or Chapter 13. The first thing to be alert to, if you are interested in buying a home after filing bankruptcy, is the many lenders out there willing to take advantage of a borrower who has recently filed bankruptcy.  There is a growing trend among subprime lenders to behave in an unethical manner toward borrowers who have bankruptcy in their background.

The lenders may require what they call a “processing” fee in advance or they may ask for inordinately large fees or attach an extremely high penalty to prepayment of a loan. Do not let this discourage you from buying a home after filing bankruptcy. Rather, be sure to enter the process armed with information.

Here are some things to keep in mind that will help you when shopping for a mortgage loan after filing for bankruptcy:

• Research at least four subprime loan quotes. This will give you an idea of current interest rates for subprime mortgage loans. Without this information you could end up signing on for an unreasonably high interest rate on a loan for someone with your credit record.
• Do not trust a lender who asks for fees in advance. The only fee required of a borrower applying for a mortgage loan should be the application fee, which covers the cost of pulling your credit application. There have been lenders who scam clients with a bankruptcy history by demanding a processing fee of hundreds, sometimes thousands.
• Insist on getting closing costs in writing from the beginning of your transaction with a lender. In some instances, this is where lenders attempt to take advantage of borrowers who have recently filed bankruptcy. They are aware that these borrowers, enticed by low interest rates, will not consider the exorbitant closing costs in advance. If you get the list of closing costs in writing beforehand, you can then research them online to be sure they are within reason. If they are too high, go back to the lender and let them know you will not pay the inflated closing costs. They will more than likely comply, since they will not want to lose your business.
• Finally, if you can’t find a deal from a mortgage company that satisfies you, consider a home financed by the seller via what is known as a land contract.

As a bankruptcy lawyer in Denver, I tell my clients that if they are prepared to do the necessary research and are armed with knowledge there is no reason they cannot get a fair deal on a mortgage after having filed bankruptcy.  Keep in mind that you can always refinance if you qualify for a lower rate a year or so down the line. If you have any questions related to these issues feel free to contact us at anytime and we can discuss your options.  [Contact us via phone: 303-955-7570; or e-mail address: help@cobankruptcyhelp.com ].