In the past, traditional mortgage lenders have automatically rejected people who have declared personal bankruptcy. Many potential home-buyers felt they must wait at least 7 to 10 years after a bankruptcy to be eligible to become homeowners. This is a common misconception.

While some people declaring personal bankruptcy have had trouble managing their money, a large number of those declaring have had unfortunate events beyond their control. Over the past several years, Americans have been filing bankruptcy at record-high levels.

Though a bankruptcy is certainly a blemish on a credit report, it does not necessarily disqualify a borrower from attractive rates and low down-payment. Recognizing that sometimes bad things happen to good people, some select loan officers are becoming more willing to take a calculated risk. Many lenders use a scoring system to determine whether potential buyers are a worthwhile risk. Unfortunately, bankruptcy gives an automatic low score. However, select lenders are beginning to look beyond the scores and look at the individuals in need. Instead of waiting 2 or 4 years after being discharged from bankruptcy, some mortgage professionals are willing to give a home loan much sooner. Those who have declared Chapter 7 bankruptcy liquidation may be eligible for a loan one day after discharge, and those who have declared Chapter 13 may be eligible for a loan even while still reorganizing.

Another common misconception is that a previous bankruptcy on your credit report will require you to have a large down-payment and pay extremely high rates and points. There are currently programs available with zero down-payment and with very attractive rates and points. Some lenders are even pre-qualifying buyers for a loan, saving time and making the home-buying experience easier and more efficient. When a buyer pre-qualifies, they will have the advantage of greater negotiating power.

No matter what the situation, select mortgage professionals have a program that will work for the buyer with a bankruptcy history. If a buyer cannot get approved, there are customized plans that can re-establish credit to help the buyer become mortgage-ready, ensuring home ownership in the near future.

Because of new options, bankruptcy no longer needs to stand in the way of getting a home loan. With the help of more compassionate lenders, those who have experienced financial difficulty will have an easier time getting a home loan.