Refinancing After Bankruptcy Is Possible

For most homeowners, refinancing after bankruptcy is still a possible option if the homeowner has a firm grasp of their situation. Certain steps can be taken to increase the chances of success when refinancing after bankruptcy, but I will get to that in a moment. Two things you should know right off the bat are that a chapter 13 will be on your credit report for seven years and a chapter 7 bankruptcy will be a blemish on your report for ten years.

You won't have to wait too long to apply. It is not unheard of to successfully get a mortgage refinance after bankruptcy discharge after about six months, though it can also take up to two years. The challenging part of getting refinanced following a bankruptcy is that lenders are going to be very hesitant toward prospective clients with a bankruptcy showing up on their credit report. If a client has become overwhelmed by debt in the past which then forced them into filing bankruptcy, then why should they be trusted to repay the loan they are currently applying for? There is no way to erase the bruise from your credit history that bankruptcy leaves behind. Your best bet is to write a letter of explanation that details the debts that got you into trouble and the reasons as to why those debts got out of control and were not repaid. Perhaps there was a death in the family or an extended hospital stay that caused you to miss work and fall behind. Do not leave out anything that seems trivial to you, because even the small stuff added to the cumulative effect. Lay it all out as honestly and clearly as possible.

A good place to start looking for a lender is on the internet. Researching online mortgage lenders will give you the opportunity to shop around and compare. You will, of course, want to see how low of an interest rate you can find. Do not get your hopes up too much, because given your recent bankruptcy, the interest rates that will be offered to you will be higher than the rates being offered to those with perfect or at least better credit ratings.

One very important tip to remember is that whatever plan you choose needs to give you the option to refinance once again as your credit rating improves. This will give you the chance to get another refi at a lower rate. Just don't mess this up because there can be severe penalties for missing a payment. These bad credit lenders are putting themselves on the line for you, because giving loans to consumers who are refinancing after bankruptcy is a high-risk business.