Refinancing a Home after Bankruptcy
Recently many Americans have sought bankruptcy protection as a result of the recession and housing crisis. Unfortunately, the bankruptcy laws cannot force a lender to refinance your home mortgage. However, you ay be able to modify your home mortgage during a Chapter 13 bankruptcy under the “Making Home Affordable” program. In Chapter 7, you may seek refinancing after bankruptcy.
If you seek refinancing from Fannie Mae and Freddie Mac after your Chapter 7 bankruptcy, the discharge must have been granted more than four years previously. FHA requires two years between the discharge date and a home loan. Borrowers must show a good credit history since the discharge and the ability to manage personal finances. In some cases a borrower may obtain financing before the two year mark, if there is evidence of extenuating circumstances causing the bankruptcy.
Qualifying for refinancing is no different for individuals with bankruptcy on their credit record. The minimum credit score is currently set at 580. The borrower must show an acceptable debt to income ratio, stable employment, and a history of responsible credit management. A lender may ask the borrower for a statement explaining how the events that led to the bankruptcy are not likely to recur.
The FHA offers a “streamlined refinancing” program for qualified borrowers. Information about this program can be found at the Department of Housing and Urban Development web site: http://www.hud.gov/offices/hsg/sfh/buying/streamli.cfm
If you need to file bankruptcy, but are concerned about keeping your home, speak with an experienced bankruptcy attorney. Your attorney can discuss your options under the federal bankruptcy laws, as well as your after-bankruptcy options for refinancing. Don’t let your financial circumstances get the best of you! Know your legal rights and use the law to your advantage.