How to Refinance a Mortgage after a Bankruptcy
There are many challenges for homeowners to re-establish credit after a bankruptcy, but home refinancing is one of the easiest ways to get begin the phase of rehabilitation. For homeowners, their property is one of their most important and valuable investments. Being able to use the liquidity in it for additional loans or taking the steps to refinance are two viable ways to reduce debt, improve your monthly payments, and generally improve your financial situation.
But for those who have gone through a bankruptcy, refinancing isn't always as easy to do. However, it's a myth that securing a home refinance after a bankruptcy is impossible to do. There are a few basic things worth understanding that can help you see that it's something you can do, as long as you meet a few basic qualifications where refinance standards are concerned.
Length of Time to Refinance After a Bankruptcy
The first thing to pay attention to is the duration of time you must wait after discharge before you can refinance. This is an exciting time for many because these rules have been changed dramatically over the last year. In the past, borrowers would have to wait 3 to 4 years to refinance following a bankruptcy depending on their lender. But today, that has been changed.
This means that the duration you must wait before refinancing is much shorter than before, which in turn means that you are better able to start moving your finances back towards the kind of situation they should be in.
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The Subprime Factor
The thing that is important to understand when trying to refinance a mortgage after filing Chapter 13 or Chapter 7 bankruptcy is that you'll likely be considered 'subprime', no matter the overall circumstances of your loan.
What this means is that you're not a 'prime' status borrower, which in turn translates to you being a larger risk to the lender who is extending you the bad-credit home loan. That increased risk means that your loan isn't going to be as favorable to you as one would be for a prime borrower. You could end up with things like:
These are put in place in a subprime mortgage loan to help lenders offset the additional risk of lending to someone with a bankruptcy in their past. But despite these elements, a refinance loan can often give you lower monthly payments and other benefits that make it worth paying attention to and considering for your home. Review the current mortgage refinance rates now.
Additional Factors to Consider When Refinancing After a Bankruptcy
The first step is making sure that you meet the basic time limit guidelines associated with refinancing your mortgage following a bankruptcy claim. But there are a number of additional factors that go into not only determining if you are eligible for a home loan after a bankruptcy, but also into the overall terms and conditions of the loan.
The exact requirements will depend upon what kind of loan you're going for. An FHA loan, for example, will have some different requirements than a loan through a more traditional lender. But at their heart, the basics still remain the same. Some of the biggest things that lenders may look for when you try to refinance after filing for bankruptcy include the following.
All in all, it's important to speak directly to a professional mortgage expert to determine what kind of options you have for refinancing your mortgage. Don't let a past bankruptcy make you feel as though you have no options here – it is very possible to refinance as long as you meet the basic requirements listed above, and taking the time to do so is something that any homeowner should consider doing for themselves if they feel refinancing can better their current financial situation. Article was written by James Swift.
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