Question by Penny: How long after bankruptcy shall I wait to apply to refinance my mortgage?
I filed for bankruptcy in 2004 and I have been paying on it for so long now that I have a chance to pay it on out. I have about a year left to go if I don’t pay it on out. I want to refinance my house. If I pay my bankruptcy and my case is discharged, how long shall I wait before applying for a loan to refinance my home?
Answer by Steve W
It sounds like you are in chapter 13 BK. Normally you have to wait until you are two years out of bankruptcy before refinancing on a conventional or fha loan. If you want any additional information pertaining to this question, feel free to shoot me an email.
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Sounds like you are in a Chapter 13. You can buy while in a Chapter 13 if the court approves. I would think you could refinance also with court approval. Hopefully you only want a rate reduction, not a cash out.
Of the three banks I’ve worked for in the last 10 years, all require discharge of a BK. Each also required at least 2 years since filing. One went by the credit score if those requiements were met, but another required 1. a GOOD reason for the BK (divorce and loss of job were not acceptable, someone needed to get sick or die), 2. NO lates or missed payments since filing, and 3. that bank didn’t lose any money. I can’t remember any more details about the last one. Talk to your bank, see what they do.
You can refi once it has been discharged since you are more than 24 months out from your filing date. You will need proof that the BK has been discharged. Once you have this, you can get what is called an Expanded Approval Loan. Lots of the big mortgage company’s offer this product (Countrywide, Beneficial, GMAC…). A lot of whether you qualify for this loan will depend on whether or not you have had any deliquency or derogatory credit since your filing date. If you have paid everything on time since 04, the you are probably good to refi as soon as you get the discharge papers. If you have had credit issues since then, the it will probably take an additional 12-24 months after discharge to get a refi.
Lots of people think that once they’ve filed for bankruptcy they will be unable to ever get a loan again, and ultimately they are unable to do anything financial ever again. This isn’t always true, there arewill help to improve your credit history in a number of different ways.