Home refinancing following bankruptcy: How to refinance mortgage

Most U.S. citizens are discharged from chapter 7 after just 4 months. Getting a bankruptcy mortgage or home refinancing after bankruptcy is surprisingly easy, provided that you have either a sufficient down payment or equity in your property. Home equity is the difference between the value of your home and any loans that are secured on it. Raising a sufficient house deposit can be difficult, but lenders require this equity to protect their legitimate business interests in the event of the customer defaulting on the loan.

How Much Equity is Required for Home Refinancing After Bankruptcy

Equity is more than just a sign of commitment on the part of the borrower, it makes it easier for the lender to recover its money in the event of default. In order to improve your chance of getting approval for a discharged bankruptcy mortgage you’re going to need a 25% to 30% house deposit.

Coupled with a series of credit improvements and you can refinance after bankruptcy at a favorable rate of interest. Getting a mortgage after bankruptcy before you’ve repaired your credit shouldn’t be a problem, but you can do better.

Improve Your Credit Score for a Discharged Bankruptcy Mortgage

One of the obstacles to home refinancing after bankruptcy is a low credit score due to the elimination of unsecured debt. Liz Pulliam-Weston of MSN Money stated: “A bankruptcy legally can remain on your credit report for up to 10 years, but its effect on your credit score can start to diminish the day your case is closed.”

In order to rebuild your credit sufficiently to refinance after bankruptcy you need to make a series of punctual repayments on a form of both revolving debt (credit and store cards) and installment debt (car finance, student loans and mortgages). If you don’t have a card, consider taking out a secured credit card.

The longer the period of time that elapses since you last defaulted, the better your credit score will be. However, paying punctually is only part of the solution. You need to optimize your credit by avoiding using more than 30% of the credit limit on any of your cards. Never close down old accounts, use them instead.

Clean-up Your Credit Report Before Home Refinancing After Bankruptcy

Most people are surprised to discover that there are errors on their credit report. Before refinancing your home after bankruptcy, you need to take steps to correct any mistakes. Lenders are unable to tell the difference between bad credit and bad data so the onus is on your to remedy any issues.

The Fair and Accurate Credit Transactions Act entitles every U.S. citizen to a free copy of their credit report from Experian, Equifax and TransUnion. You’ll need to check through each report as the data is completely unique. The FTC recommends that you get your free credit report from AnnualCreditReport.com.

Before applying for a discharged bankruptcy mortgage, you need to scrutinize your credit report for errors. Discharged bankrupts need to look for debts that they’ve included in their bankruptcy agreement that still show as active. These can quickly and easily be removed prior to home refinancing after bankruptcy.

How to Legally Stop a Foreclosure

People experience foreclosures on their home mortgages for many reasons. If you’ve been served with foreclosure papers, you don’t have to fear losing your home or being put out of your home as if you have no options. Depending on your personal needs, there are several legal courses that you can take to stop a foreclosure from taking place.

Discuss Your Options With Your Mortgage Loan Lender

To many homeowners’ surprise, many lenders are able to provide you with several alternatives to prevent foreclosure from happening. Your lender can agree to a forbearance or reinstatement which allows your payment in arrears to be placed at the end of the mortgage loan. Sometimes the lender agrees to allow you to make additional payments until you are up to date on your payments. Your lender may, also, agree to refinance your property.

Make sure that you take the time to evaluate your present financial condition prior to contacting your lender. You will be in a better position to get what you want from the lender if you know what you can truthfully afford to pay on your mortgage loan. Assessing your finances prior to talking with your lender will also help you to stay out of foreclosure.

File Bankruptcy

If you are in a position where you either do not want your home any longer, or you are in a position where you can no longer afford the home, depending on your financial situation, you may want to consider filing a Chapter 7 bankruptcy. According to the United States Courts, a Chapter 7 bankruptcy completely liquidates your debts allowing you to have a fresh start in life.

If you desire to keep your home, you may be able to file a Chapter 13 bankruptcy. With a Chapter 13 bankruptcy, you keep your home and you pay a percentage of your debts in one consolidated payment over a period of three to five years.

Sell Your Real Estate

You may need to sell your home if you cannot afford your home any longer. However, if you have an ample amount of equity in your home, you may be able to pay your mortgage balance and receive money for a fresh start.

If you do not have enough equity in your property to pay off your mortgage loan balance, according to Bobbi Dempsey, writer of the article, “Fearing Foreclosure? Consider a Short Sale,” your lender will usually agree to a short sale when you demonstrate an honest attempt to rectify the situation. This means that the lender will agree to a lesser amount to settle the mortgage debt. If a real estate agent is involved, the lender will pay the real estate agent’s commission fee to list your property.

Consider Your Credit Files

Whether you decide to file a bankruptcy or sell your home in a short sale to prevent foreclosure, your history of how you’ve paid on your mortgage loan or the filing of a bankruptcy will be reported to the credit reporting agencies. You have to decide what is best for your personal situation. A bankruptcy remains in your credit files for up to 10 years. Other negative activity and information remains for up to seven years.