After your bankruptcy closes, it's wise to wait before trying to refinance, so that you have time to start rebuilding your credit and are able to get a better rate. Or you could refinance before you file for bankruptcy, which in certain situations could help you avoid the bankruptcy altogether. Here are ways to refinance.
Related Searches:
Difficulty:
Moderate
Instructions
1
Spend six months rebuilding your credit rating by paying your bills on time. While you can get a refinance loan immediately after your bankruptcy, waiting several months to patch up your credit will give you more options to choose from and can help you find a lender willing to give you slightly better rates and lower fees. Taking steps to rebuild credit shows a lender you are on the right track.
2
Start or grow a savings account. When you file for a refinance, the lender will consider your assets, and having money in a savings account will make you a more attractive candidate for a relatively good rate. If you have assets worth money after your bankruptcy, like a car, artwork or jewelry, consider selling them to build up some savings.
3
Search online for lenders. Because your credit score has been damaged by bankruptcy, you'll have to settle for a sub-prime lender, and those can most easily be found online.
4
Compare rates between refinance loans. The rates available to you as a sub-prime borrower can vary, as will the fees attached to the loans. Be prepared to pay a higher interest rate than regular borrowers, but make sure you are getting the best rate for your situation.
5
Decide if you want to cash out any equity you might have in your home when you refinance. If you keep the equity in the home, it can help you rebuild your credit, but if your home needs improvement, this might be a good time to get it done. As long as you are adding value to your home, it's OK to take out the equity.
6
Refinance again in a few years when your credit is back in the normal range. Good credit behavior during that time should restore your credit to the point where you qualify for the same rates that the average borrower could receive. Refinancing again can help you save even more money.
Tips & Warnings
Getting a temporary second job can help you come up with the funds for a savings account.
Take the time to research the sub-prime lender. While many lenders you'll encounter are reputable, some sub-prime lenders prey on the desperation of people with poor credit to lock them into ridiculous terms and fees. Check with the Better Business Bureau (BBB) to read about possible complaints (see Resources below).
During periods of low interest rates, homeowners may consider refinancing their current mortgage to lower their monthly payment. Other reasons to refinance...
Refinancing a home after bankruptcy is possible, but it can take time. The bankruptcy process relinquishes the debtor's responsibility to repay most...
