To some people, bankruptcy brings relief from being suffocated under a mountain of debt, and others experience it as a shameful sign of embarrassment and failure. Regardless of how you feel about your bankruptcy, once it's been discharged, it's not the end of the world or the end of qualifying for credit. Admittedly, bankruptcies create a few kinks and curve balls to the credit process; but, be reassured - if you still own your house and are up to date on the payments, there are ways to refinance after bankruptcy.
Qualifying for a Refinance After Bankruptcy
Consult with your bankruptcy attorney. Certain rules apply for refinancing during or after a bankruptcy. The FHA Home Loans website states that individuals can refinance their home after two years from the time the bankruptcy was discharged.
Call several lenders including your own bank to inquire about what kind of programs they offer for people whose credit is less than perfect, suggests the Cliver Learning Community website. Expect to pay a higher interest rate and possibly be asked for a larger-than-usual down payment.
After ascertaining which two or three companies will offer you a refinance, ask to speak to the person in the mortgage department in charge of cases like yours. Make an appointment and present your case.
After Bankruptcy: The Loan Application
Discuss the terms of the loan in detail with the loan officer and check the interest rate. Make sure you understand all facets of what is being explained. Take someone with you who can help explain it to you if necessary. Ask questions and insist on clear answers.
Once you've made your final decision on which company you want to work with, fill out their loan application. Be prepared to answer numerous personal questions. These detailed questions are normal and you are not being singled out because of your bankruptcy.
Take home a copy of the application, check it over carefully, and then sign it and return to the mortgage company. Keep a copy for your records.
Gather all necessary paperwork needed for the application. Documents required will consist of but not be limited to the following: Your current mortgage papers, current interest rate, balance of existing loan, social security card, birth certificate, bankruptcy discharge documents, bank statements and pay stubs showing proof of income, two years tax documents and proof of assets. Make copies of all documents and give the copies to the mortgage company at the time of the application.
The loan officer taking your application will ask you to sign numerous documents related to your refinance. This process may seem very foreign to you. Make sure you ask questions and understand what you're signing before doing so.
Once you're completed your application for a mortgage refinance, there will be a waiting period until the loan is processed. At the point the loan is ready for your to sign, get copies of all closing documents to review in advance of closing. Check them again for accuracy. Review the terms carefully with an individual you trust who can answer any of your questions. It should not be the mortgage broker, rather an unbiased person.
The Closing: A Post-Bankruptcy Refinanced Home
The closing will be held at an attorney's office, most likely one provided by the mortgage company. If you are uncomfortable about this, speak with the bank to see what other arrangements can be made. You will need to bring identification in the form of a drivers license and a certified check with the amount of your down payment.
Don't allow the mortgage company or the lawyer to bully you if you have questions throughout the process. Make sure your questions are answered beforehand.
Sources for this article include:
