How to get approved for a mortgage after bankruptcy?

Our economy naturally includes bankruptcy. As per the Australian Financial Security Authority, 12,450 Australians declared bankruptcy in 2019–20. (AFSA). This was really the lowest number of bankruptcies in 30 years, with fewer cases being reported across all states and territories, notwithstanding the epidemic.

Without a doubt, filing for bankruptcy can alter your entire life. But that does not imply that you cannot rebuild your life by obtaining a mortgage. While it’s true that some lenders won’t even accept a house loan application from someone who has previously filed for bankruptcy, if you’ve been discharged, others may still be willing to provide you a loan. You must be aware of the actions you may take to boost your application if you want to increase your chances of obtaining a mortgage following a bankruptcy discharge.

What is bankruptcy with a discharge?

As the name implies, when you receive a bankruptcy discharge, you are released from the requirements, including having few assets and being prohibited from travelling abroad.

From a financial perspective, you can now legitimately reapply for credit. Your credit history will still reflect that you were previously bankrupt, though. Because of this, some lenders could be hesitant to evaluate your application for a house loan, even if you’ve been discharged.

Can a bankrupt who has been discharged have a mortgage?

Even if you have filed for bankruptcy, you might still be able to secure financing to help you purchase a new house. While it’s true that more well-known lenders like Australia’s major banks and credit unions won’t lend to people with bad credit histories, there are a number of Mortgage Brokers in Sydney who specialize in loans for people who have been declared bankrupt as well as other people with bad credit who will still be willing to extend credit to you.

Using prudent and strict money management techniques throughout your bankruptcy may increase your chances of getting a home loan once you have been discharged. Your chances of getting a home loan with more reasonable terms could be increased if you can show lenders evidence of consistent savings, wise spending, and continuous income.

Important steps to take while applying for a mortgage after bankruptcy:

Wait at least two years before applying for a mortgage:

The best course of action is to hold off for at least two years after being discharged from bankruptcy. In order to demonstrate to lenders that you are in a more stable situation, borrowers might use that waiting period to establish good credit by paying their payments on time and having solid employment.

Find a specialized mortgage provider with a solid history and standing:

While some bankers will be more cautious about lending to borrowers with less-than-perfect credit histories, there are experts with a particular emphasis on persons who declared bankruptcy and other comparable circumstances.

Avoid the temptation to submit multiple loan applications:

Keep in mind that every loan application leaves a mark on your credit history. Multiple applications in a short period of time can give the people examining your financial history an unfavourable image because, by definition, if you submit multiple applications quickly, you have already been turned down by a few lenders.

Save up for the deposit:

Save money for the deposit because lenders will ask for extra money up front from discharged bankruptcies as a method to offset the risk they are incurring. Another excellent strategy to persuade borrowers that you are trustworthy with your money and likely to repay the loan in full is to have a deposit that is greater than 20% of the purchase price.

Although it could seem that way at the time, filing for bankruptcy is not the end of the world and can give families a second shot. Although getting a home loan will probably be more difficult, there are still possibilities. Do everything you can to raise your credit score, and consider talking to us in the process.