Can I get a Mortgage after Bankruptcy?
Most potential home owners who are post-bankruptcy, don’t know if they can actually get a mortgage.
But, finding and arranging a mortgage after bankruptcy is something specialist mortgage advisors deal with frequently.
In this article we look to guide you through the criteria you may come up against when applying for a mortgage following bankruptcy.
Can I get a Mortgage after Bankruptcy?
First things first, as per the terms of bankruptcy you need to be discharged by the courts before you can apply for any type of credit.
However, once discharged it is possible to get a mortgage with a little homework.
Important: If you are intending to apply for a mortgage you will need to have your bankruptcy discharge certificate.
Bankruptcy is considered to be a severe credit issue so can cause issues with many mortgage providers. There are lenders though that will see past your bankruptcy. Some of these lenders are also mainstream providers.
It’s also worth bearing in mind that if you have already principally been accepted for a mortgage, you may still be declined after a full application because the lender doesn’t allow bankruptcy. This is where having a mortgage advisor who specialises in adverse credit is useful. They already know the lenders who don’t allow bankruptcy and can find you a lender based on your circumstances.
Who can get a mortgage after Bankruptcy?
Obtaining a mortgage after bankruptcy has a lot to with time. Therefore, the longer you have been discharged from the courts, the more likely you are to be approved and the wider the pool of lenders.
Very few lenders will approve a mortgage on day 1 of discharge. Though it’s possible, providers will make assessments following very strict guidelines. They may also require you to have a substantial deposit as their loan to value (LTV) will be lower. They will also come with hefty fees and rates.
You will find that if you were discharged over 4 years ago and have a great credit history, then a lot of lenders will see you as no different to anyone else. Meaning you could get a higher LTV at 90-95% and better rates.
Please note: Some courts will also put bankruptcy restriction orders in place once discharged to extend the period of no borrowing for certain people.
Although based on the above you may be eligible for a mortgage after bankruptcy it’s important to know that you will be assessed on a number of other factors such as income, affordability and any other credit issues.
How can I increase my chances of approval after Bankruptcy?
Now you have an idea how long you may need to wait before you could get a mortgage, is there anything else you could do to give yourself the best chance of approval?
Apart from having a specialist mortgage advisor on side who can establish if you are eligible or not. There are two other things you can do.
First, check all your credit reports. There are three main credit reference agencies that lenders use and the information on each can differ greatly. Sites such as Check My File can give you access to all three in one place.
It’s important to check your reports as the information on your files can sometimes be different to your bankruptcy discharge date and the settlement dates of your credit accounts. It would then appear that you have outstanding debts or defaults because the creditors have not updated their records correctly.
The second thing you can do is to rebuild your credit score so you can show lenders you are financially responsible.
You can do this in a number of ways:
- Get on the electoral roll
- Pay your bills on time
- Don’t max your credit
- Use a credit-builder card or loan
- Take out a store card or other form of small credit
- Limit your credit applications
Will credit issues after bankruptcy affect any mortgage application?
Bankruptcy acts as a mechanism to reset your credit file. Therefore, any outstanding credit issues such as defaults, CCJ’s and debt management plans will effectively be wiped off and deemed settled.
Once you have declared bankruptcy and following a period of being unable to take out any form of credit, you will be discharged and can rebuild your credit file.
However, if you have new financial issues following bankruptcy this makes it more difficult to obtain a mortgage with lenders. You are considered to be a high risk having discharged bankruptcy so lenders will want to see a clean credit file following that. It doesn’t mean that it is not impossible if you do have new financial issues.
Having bad credit as well as bankruptcy on file greatly narrows the pool of lenders. Seeking advice before making an application is paramount. They will look at your individual circumstances including what the credit issues are and how recent they are, then try to match you with the right lender to suit you.
National Hunter Database
Another important thing you should be aware of is the National Hunter Database. Primarily this is an anti-fraud register, but it also has records of anyone who has faced bankruptcy.
This can be a major sticking point for some lenders and a source of frustration to applicants. You may pass their credit check and have a decision in principle, but if you come up on the hunter report after you’ve made a full application, they may choose to decline you. It’s also a common reason why people have been declined previously.
After 6 years any trace of bad credit on file should usually be gone. However, even if you were discharged from bankruptcy over 6 years ago you will still appear on this report. A further reason to seek advice from a specialist mortgage advisor who knows the market and lenders who will consider your application.
What next?
If you are still unsure where you stand, speak to a specialist mortgage advisor. They will save you time and money as they will assess your individual situation and advise on what to do next or which lenders you will be eligible for.
They have the experience and will be able to help you if for example:
- You have a bankruptcy discharge from 1 – 6+ years ago
- You have a history of bankruptcy and repossession
- You have a 10% – 15% deposit with discharged bankruptcy
- You have an older discharged bankruptcy with 5% deposit
- You have a bankruptcy discharge and a large deposit
- You need to re-mortgage after a bankruptcy
Contact us at Online Mortgage Guru on 0345 3669799 or email us via info@theonlinemortgageguru.co.uk and we will put you in touch with a suitable specialist to handle your enquiry.
