How to Refinance With a Bankruptcy

Getting a mortgage after bankruptcy is possible with the right tools.

Bankruptcy is the last choice for most people facing the inability to pay off debt. Getting through a bankruptcy and then being able to re-establish credit and qualify for a mortgage refinance and other types of loans is the goal. No one plans to face bankruptcy, but there is hope for financial recovery after the process. With the right tools and advice the chances of getting a mortgage refinance within a reasonable amount of time are in your favor.

Instructions

1. Meet with your bank, mortgage broker or financial planner to see if the time is right for you to apply for a mortgage refinance. Some lenders require little to no time lapse after a bankruptcy discharge to apply for a new mortgage. Other companies prefer borrowers wait anywhere from six months to two years to apply after a bankruptcy discharge.

2. Continue making payments on any debt you still owe after the bankruptcy discharge. Making consistent, on-time payments helps raise your credit rating faster. This gets you on the road to financial recovery and makes you eligible for a mortgage refinance sooner than you might expect.

3. Limit the amount of credit card and other debt you accrue after the bankruptcy discharge. Your debt-to-credit ratio is what determines your eligibility for funds. If your debt-to-credit ratio gets too high too fast after a bankruptcy discharge it will be difficult to qualify for a mortgage refinance.

4. Establish your income and ability to repay the mortgage by presenting pay stubs and tax returns to your lender. Your ability to repay is the most important part of your overall financial picture.

5. Clean up your credit report with each of the three credit reporting agencies, Trans Union, Equifax and Experian. Often the information on credit reports is inaccurate, causing your credit rating to go down. Most of the time a letter of explanation as to why something should be removed from your credit report is all that's needed. This is especially important after a bankruptcy discharge.

Tips & Warnings

• Don't get discouraged if your first attempt to qualify for a mortgage refinance after a bankruptcy isn't successful. You can always reapply in six months. During that time, following these steps will help re-establish your credit and make you a better candidate for a mortgage refinance.

References

• BankruptcyHome.com: Mortgage After Bankruptcy
• MortgaeLoan.com: Refinancing after a Bankruptcy