How Long After My Chapter 13 Bankruptcy Can I Refinance Through Fannie Mae?
"The New York Times" reports that Fannie Mae is the nation's largest purchaser of mortgages, as of 2011. That makes the agency a juggernaut in the home-buying industry, with most banks, credit unions and other lenders following Fannie Mae guidelines for extending mortgage credit. Fannie Mae has guidelines allowing for the purchase of a home after bankruptcy, but not until your use of credit has been rehabilitated.
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Timelines
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Neighborhood Partnership Housing Services, a nonprofit organization, reports that people must wait up to four years after bankruptcy to qualify for new mortgage credit backed by Fannie Mae. Chapter 13, one of the most popular forms of bankruptcy, requires completion of a payment plan lasting three to five years. Then a two-year wait begins to become eligible for refinancing through Fannie Mae. The wait is four years in Chapter 13 if the bankruptcy was dismissed because of procedural errors or other reasons. The four-year wait begins on the date of the dismissal. People filing for other forms of bankruptcy, such as Chapter 7, must generally wait four years from the date of dismissal or discharge.
Extenuating Circumstances
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Fannie Mae allows some flexibility in its lending guidelines if the borrower can show "sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations." This provision allows Fannie Mae to reduce the waiting time in some cases, although the agency does not have hard and fast rules about exceptions. The provision exists to help people who encountered severe financial problems through no fault of their own. An example could include a couple who were both laid off for more than a year, resulting in bankruptcy. People who had excellent credit until a sudden event are likely to receive special consideration.
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Documentation
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Borrowers seeking special consideration must provide paperwork documenting their situation. The documentation could include divorce papers, job elimination notices, severance agreements, federal income tax returns and more. The documentation is presented to the lender during the application process and reviewed for consideration.
Credit Repair
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Regardless of what happened before your bankruptcy you credit should be perfect after the bankruptcy. That means paying paying all bills on time and keeping debt levels low. Generally, Fannie Mae requires no more than two past-due payments on installment loans over the past 24 months and no late rent payments over the past 12 months.
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