While bankruptcy remains on your credit for up to ten years, and may result in a higher interest rate on auto loans and credit cards, filing for bankruptcy will not prevent you from receiving a home loan. Fortunately, there are ways to obtain a mortgage after bankruptcy. Here are a few tips that will put you on the road to homeownership.

When is the Right Time to Apply for a Mortgage

Although it is possible to receive a mortgage loan one day following a bankruptcy, you can expect to pay a very high interest rate. A high interest rate may increase your monthly payments by several hundred dollars. If you can afford this amount, applying for a home loan may be a wise choice. However, if you were to wait at least 24 months after your bankruptcy, you may be able to receive a reasonable interest rate.

Establish New Credit Accounts

Waiting two years before applying for a mortgage loan is ideal because you are given ample time to rebuild or re-establish credit. If you apply for a loan before opening a new credit account, mortgage lenders are reluctant because you have not shown any credit improvements.

On the other hand, if you were to obtain at least three to four new credit accounts, pay the balances on time, and never miss a payment; mortgage lenders will notice credit improvements. Thus, they have confidence in your ability to repay future loans. If possible, attempt to payoff the credit card balances each month, or carry low balances. This way, you avoid huge finance charges.

How to Choose a Lender for Home Mortgages?

Choosing a lender for a home mortgage following a bankruptcy is not difficult. True, traditional lenders and mortgage companies rarely offer decent rates for individuals who have filed bankruptcy. However, if you improve your credit score, you may be able to obtain a good rate from a sub prime lender.

Sub prime lenders specialize in offering loans to individuals with "less than perfect credit." Moreover, if you submit an application through a mortgage broker, you will receive multiple offers from various sub prime lenders. Comparing rates and terms is beneficial because you can select the financing package with the best deal.