Table of Content
While bankruptcy could provide some relief to individuals who are overwhelmed by immense debts, doing so has serious consequences. Bankruptcy is generally a last resort and filing for bankruptcy can have lasting impacts on an individuals credit score. If you had an adjustable-rate mortgage when you filed for bankruptcy, then the mortgage rate can change according to the terms of your mortgage. Conversely, if an individual had a fixed-rate mortgage before filing for bankruptcy, then their mortgage would be locked in at such a rate. Depending on your lender and whether you have a lump sum of cash, you may be eligible to lower your monthly payments through a mortgage recast. Youd pay your lender a lump sum to reduce your principal balance, often $5,000 to $10,000, and your monthly payments are recalculated based on your reduced principal amount.
It’ll take you about a year, or more, to recover from bankruptcy and get back on your feet. You may be hesitant to contact a lender for fear of being turned down, but don’t worry. In truth, many homeowners don’t have an in-depth understanding of how bankruptcy impacts their existing mortgage. It also doesn’t help that there’s a lot of misinformation circulating online about refinancing after a bankruptcy discharge, which can be confusing to the average consumer. Chapter 13 bankruptcy lets you restructure your debt and retain ownership of your property as long as you can continue make your mortgage payments on time.
Can I Refinance My Home While In Chapter 11 Bankruptcy
If you qualify for a home loan through the Federal Housing Administration , the Department of Veterans Affairs or U.S. Department of Agriculture , you may have a better chance of successfully refinancing. These government-insured mortgages can – in some cases – be approved for borrowers with credit scores as low as 500, depending on your loan-to-value ratio .
The consumer can get a fresh financial start where they will no longer owe anything to any creditors. Outstanding collection accounts no matter how much the outstanding unpaid balance is, as well as any judgments get wiped out with a Chapter 7 Bankruptcy discharge. Home Buyers can qualify for FHA Loans two years from the discharged date of a Chapter 7 Bankruptcy. If you are behind on your mortgage before filing your Chapter 13, you can pay off the arrears through your repayment plan.
Are There Certain Terms & Conditions to Adhere To?
You will need to provide your Certificate of Eligibility as well as your DD-214. A VA loan is available to qualified borrowers and may be reused multiple times as long as the previous VA loan has been repaid. There is no down payment for a VA loan, so 100% of the purchase price may be financed. Silver Leaf Mortgage works with lenders that will waive the underwriting fee, often around $950, for those using a VA loan.
No matter which type of loan you choose, youll need to meet minimum credit standards before you qualify to refinance. Bankruptcy puts a massive hit on your credit rating, so you may need to focus on raising it prior to your refinance. To avoid disappointment, know your credit score and your loans minimum credit requirements before you apply.
Alternatives To Refinancing After Bankruptcy
If at any time during your Chapter 13 case, you fail to pay your monthly mortgage obligation , your lender can seek court permission to foreclose on your house. A mortgage refinance involves replacing your existing loan with a new mortgage, perhaps to secure a better mortgage rate, lower your monthly payment or cash out some of your available equity. You will also need to meet minimum credit requirements to refinance a loan. If you are short of these requirements – which can happen after a bankruptcy – use the time that you have to wait to refinance to rebuild your credit score. This minimum two-year waiting period is typically only observed by federally-backed loans, such as FHA loans, as well. For most standard loan providers, you will need to wait an additional two years – amounting to a four-year total wait.
But sometimes, it might take less than seven years to get a new mortgage after a foreclosure. The amount of time you have to wait before applying for a new mortgage loan depends on the type of lender and your financial circumstances. In a Chapter 13, that means you made all of your court-required scheduled payments into your plan , and your creditors had to write off any remaining balances. You dont even have to wait for your bankruptcy discharge to get a mortgage when you file Chapter 13.
Step 3: Complete Underwriting And Appraisals
Its important to explain to each lender why you declared bankruptcy. Lower monthly payments, longer loan terms, and more cash for debt payments are all benefits to refinancing your home after bankruptcy. USDA loans, VA loans, and FHA loans have a waiting period of only one day for Chapter 13 bankruptcy, once you’ve made 12 qualifying on-time loan payments. The Rocket Mortgage Learning Center is dedicated to bringing you articles on home buying, loan types, mortgage basics and refinancing.
Knowing the rules of refinancing and planning the best time to do it will be key to success. The best place to start is with the attorney that handled your bankruptcy, who should be familiar with the motion paperwork needed in your particular district. For starters, if you are underwater on your mortgage, meaning your mortgage amount is higher than the value of your home, your only refinance opportunity will be through the HARP program. If you have enough equity to pay the second mortgage in full, that’s easy. Lay-off or closing of employer – requires documentation from employer stating reason for lay-off, and receipt of unemployment benefits for a minimum of 6 months. This is not entirely true, and these articles are designed to drive traffic to websites that are trying to collect, and sell mortgage leads to mortgage companies.
However, certain types of debts, including tax debts, are considered nondischargeable, which means they won’t be erased in bankruptcy. Most lenders require a home appraisal to complete the refinancing process. This ensures they aren’t lending more on the home than the amount it is worth.
An appraiser will evaluate the home’s condition, including square footage, number of bedrooms, and the home’s age. If applying with an additional party, such as a spouse, be sure to also have these documents prepared for them before meeting with your lender. Refinancing after bankruptcy also depends on whether you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. These are the two most common types of personal bankruptcy filings. It’s not something that will happen right away, but it is possible to refinance after a bankruptcy. Whether you’ve been through a Chapter 7 or Chapter 13 bankruptcy, you’re one step closer to your goal simply by learning more about the process.
For example, you’ll need to wait three years after the bankruptcy court’s discharge date to get a loan from the United States Department of Agriculture . The waiting period to qualify for a Federal Housing Administration loan or a loan from the United States Department of Veterans Affairs is two years after your court discharge date. However, having a bankruptcy on your credit report will make it more difficult to qualify for any refinancing opportunities.
No comments:
Post a Comment