As the financial markets heave, millions of American are finding it increasingly difficult to keep up with their bills. Furloughs, lay offs, and salary reductions are weighing in. In addition, home values have plummeted yet at the same time mortgage payments and taxes are on the rise for some.
These days, we might assume that the homeowner who declares personal bankruptcy is doing so because their home went into foreclosure. But, not every person who owns a home is behind on their house payments. Instead, auto loans, personal loans, credit cards and other non-housing debt may have overwhelmed their finances, making it difficult for them to stay solvent.
For the person who still owns their home, who isn’t behind on payments, but is essentially bankrupt, one question remains: can they still refinance their home post bankruptcy?
That question isn’t easy to answer, particularly in light of the recent push by the Obama administration to ensure that struggling homeowners receive a modified mortgage, one with a lower interest rate and resultant lower monthly payment. If you qualify for this type of court ordered assistance, than that answer is yes.
For everyone else, there are a number of factors to consider before seeking home refinancing:
Keep up with your debt obligations. Some of your debt may have been discharged in bankruptcy court, but you also have monthly utility bills to pay, auto insurance, homeowners insurance, mortgage payments and other expenses. Pay these on time and you’ll demonstrate a proven track record.
Apply for new credit. Credit has tightened considerably over the past year, therefore your chances of obtaining new credit with a recent bankruptcy on your credit record are slim. However, if you are approved make sure that you carefully use your new credit card and pay it off monthly. Again, you’ll be proving to creditors that you can responsibly manage your personal debt.
Save your money. Many Americans are saving their money these days, the best savings rate in more than a quarter of a century. This is a good practice because having an emergency fund in place can ensure that you’ll be able to handle life’s emergencies as they come without falling back into debt.
Approximately one year after having your personal bankruptcy completed, go ahead and start obtaining mortgage quotes. You’ll know right away if you’ve been approved and your loan terms. If your rate is high, then the effects of your personal bankruptcy are still weighing in, therefore you may want to wait for at least six months before applying again.
In the meantime, obtain copies of your credit reports and your credit score and settle any open issues with creditors that you may have. Remember, the higher your credit score the more likely you’ll be approved for home loan refinancing. Personal bankruptcy may have set you back for awhile, but it need not hold your down for the long term.
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Home refinancing after a bankruptcy is possible. You might have to wait 3 years. You need to rebuild your credit and this takes some time. Also, the rate you get will not be the best.
Informative post, however the “modification” programs you mentioned are NOT refinance loans. If your fit into the modification programs then that means you can prove a financial hardship, that requires you to lower your payments to avoid foreclosure. A refinance is when you choose to get a new mortgage, with better terms than your current mortgage, and therefore you must qualify.
The home affordable refinance program does allow some borrowers to refinance up to 105% of their homes value, but if you are currently in a bankruptcy, you will not be likely able to qualify.
So if you need to reduce your payments die to hardship you may be able to modify your existing mortgage, if not maybe you can refinance. A bankruptcy will not likely affect your modification qualification, but you will probaly need to wait a minimum of 2 to 3 years after a bankruptcy to get qualified for a refinance.
James Mucci –
Michigan Refinancing Professional
getting bad credit card loan is not really hard to acquire these days considering lots of lenders grant these kinds of auto loans to opportunity seekers having less than ideal credit report. It is also one of many ways of rebuilding your credit, but to make that come to pass you should be alot more accountable when it comes to paying off your liabilities with the lenders.. Still you need to make sure that this company also give you guidelines on how to obtain the best deal, whether it’s a trade in or a new car deal.
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I like the way you think, this is a very good article. Bankruptcy is not the end of the road, people have to understan that it may take a while but if they are responsible and willing to work at it one step at a time then you can recover. Very well done. Thanks for putting this up.