Though it may seem impossible, refinancing your home loan after going through bankruptcy is feasible as long as you can meet certain requirements. Finding the right lender is however, a challenging task.
Refinancing After Bankruptcy is Possible
Refinancing a home mortgage is probably one of the few financial transactions that someone who has gone through bankruptcy can achieve within a small period of time after the bankruptcy has been discharged. Since a mortgage loan is secured by an asset, the usually extremely low credit score bared by someone with a bankruptcy in his credit report isnt that detrimental.
Raising your Credit Score
Moreover, refinancing a home loan is an excellent opportunity to raise your credit score and improve credit history. The monthly payments you make will be recorded into your credit report and this will contribute to a continuous increment on your credit rank.
However, since you wont be able to apply for a refinance home loan till six months after your bankruptcy has been discharged. You need to work hard during this period in order to build a good credit history so as to make sure you get approved for your refinance home loan.
Getting Ready for Applying
In order to do so, you need to make all your payments on time including your current home loan installments. This is essential since any late payments or missed payments may be an obstacle between you and your refinance home loan.
If you havent done so yet, open a bank account, either a checking or savings account and get a credit card. If you cant get approved for an unsecured credit card, dont hesitate, apply for a secured credit card and start using it and making regular payments. All this will help you build a healthy credit history and will ensure you get approved for a refinance loan.
Search for a Lender and ask for Loan Quotes
The search for a suitable lender is the main task you need to complete. You can refinance with the same lender that is currently handling your home loan, but dont stick to the first offer you receive. Request loan quotes with every lender you run into and even request online quotes as youll be able to get much better deals this way.
Pay attention to Interest Rates and other fees
You need to pay special attention not only to the interest rate and fees charged by the lender that will refinance your home loan, but also to any punitive fees that your current mortgage loan lender may charge for pre-cancellation of your loan. These fees and costs may turn refinance too onerous to even consider the possibility.
You may have to pay a slightly higher interest rate since youve got a bankruptcy on your credit report, however, dont let lenders take advantage of this situation. This kind of loan is secured by collateral so there is no reason to charge high interest rates, no matter how low your credit score is. |
