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How Long After Bankruptcy Can You Refinance Your Home

Waiting Period For Chapter 13 Bankruptcy

Can We Trust Our Loan Officer’s Advice?

Chapter 13 bankruptcy waiting periods are generally shorter. For instance, after a Chapter 13 discharge, as long as youve made 12 qualifying on-time payments, youll only need to wait a day to refinance a government-backed loan.

The waiting periods to refinance after a Chapter 13 discharge are:

  • FHA, VA, and USDA loans: 1 day with 12 qualifying on-time payments
  • Conventional loans: 2 years
  • Jumbo loans: 7 years

With conventional loans, if you dont complete the terms of your repayment plan, the court can dismiss your bankruptcy, and youll have to wait four years after that date to refinance your mortgage.

Tip:

How Long After A Chapter 7 Bankruptcy

2 Year Waiting Period

  • An FHA loan has a waiting period of 2 years from date bankruptcy was discharged
  • A VA loan has a waiting period of 2 years from date bankruptcy was discharged

3 years Waiting Period

  • A USDA loan has a waiting period of 2 years from date bankruptcy was discharged

4 years Waiting Period

  • A Conventional loan has a waiting period of 4 years from date bankruptcy was discharged

Conforming Mortgage Loan Requirements

Fannie Mae and Freddie Mac the national rule-makers for conforming loans allow Chapter 7 filers to apply for a Fannie Mae or Freddie Mac mortgage after bankruptcy. But the wait is four years after their discharge or dismissal .

The waiting period for Chapter 13 bankruptcies is two years. But this is two years after discharge, not filing. Since Chapter 13 bankruptcies typically take five years to discharge, your total waiting period under a conforming mortgage program would be seven years from the filing date.

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Additional Requirements And Assistance

It won’t come as a surprise that you’ll need to meet other criteria, tooalthough you might not realize that individual lenders could impose tougher guidelines. Even so, with persistence, it’s likely that you’ll find a bank who will be willing to work with you.

Additionally, your state could have a first-time homebuyer program to help with your down payment. With the right combination of programs, chances are you’ll be in your new house in no time.

You can find out how to rebuild your credit in Improving Credit After Bankruptcy or Foreclosure.

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    Increasing Your Home Equity After Bankruptcy

    Can you refinance your mortgage a second time (or more)?

    If your residence is in an area where real estate values have been holding steady or increasing, you may have an easier time getting your refinance loan approved after bankruptcy. Most often, lenders want you to have some equity in the home, which you may not have as you emerge from bankruptcy. If you lack equity in your home, making some improvements may increase its value.

    Home improvements that increase value include:

    • Painting the homes exterior with good-quality paint
    • Landscaping the front yard to increase curb appeal
    • Adding a bathroom

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    Dismissal Vs Discharge Of Your Bankruptcy Claim

    When debtors declare bankruptcy, they are asking the Bankruptcy Court to take over their finances. The immediate impact of the declaration is that the court issues a temporary stay of collection activity. That means foreclosure or auto repossession efforts as well as phone calls and letters must stop while the case is being resolved.

    In some cases, the court will dismiss Chapter 7 claims if it determines to repay creditors some or all of what they are owed. The determine the debtors income is sufficient, given the cost of living and average incomes in your area. If your bankruptcy declaration is dismissed, you end up back where you started.

    If the court accepts a claim for relief, the Chapter 7 filing results in the liquidation of the debtors assets and the debts being discharged. That means, that the debtor is no longer a debtor and can begin with a fresh start and much worse credit. With a Chapter 13 bankruptcy, the discharge is usually granted 4 years after filing, as repayment plans typically last 3 5 years.

    When Can I Refinance My Home After Bankruptcy

    Depending on your loan type, Chapter 13 bankruptcies may allow refinance as early as a year into making payments or up to 2 years after discharge. You can refinance your home after a Chapter 7 bankruptcy between 2 4 years after discharge.

    To know when youll be eligible to refinance, its important to understand the difference between your filing date and your discharge or dismissal date. The filing date is when you begin the bankruptcy process. Discharge or dismissal is when the process comes to an end.

    Discharge means that the bankruptcy has been completed and your unpaid debts are written off. With Chapter 7, this will typically happen in a matter of months. Chapter 13 discharge happens once your repayment plan is completed, which takes between 3 5 years.

    Dismissal is another way a bankruptcy filing can end, and means that your case has been dismissed either because you withdrew your filing or because you werent following the rules of the bankruptcy.

    With Chapter 13, FHA and VA loan borrowers may be able to refinance while theyre still in bankruptcy, after theyve made a year of on-time payments according to their repayment plan.

    On conventional loans, youll need to wait 2 years after Chapter 13 discharge to qualify for a loan. Remember that discharge on a Chapter 13 bankruptcy comes after youve completed your repayment plan, which also takes a few years.

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    Chapter 13 Waiting Periods

    For a Chapter 13 claim, you can apply for a new FHA loan 1 year after dismissal. Thats if you have made court ordered payments on time and have received written permission from the court overseeing your case.

    Your application must go through manual underwriting and the lender must be satisfied with your explanation of what led to bankruptcy and why it wont happen again. Once 2 years have passed since discharge, you are able to apply for a mortgage without manual underwriting.

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    Chapter 13 bankruptcy can give you the chance to repay all or some of your debts during a repayment period that typically lasts three to five years. The remainder of your debt will be discharged when your repayment period comes to an end.

    This type of bankruptcy can stay on your credit report for up to seven years. To get a mortgage after Chapter 13 bankruptcy, you’ll need to get permission from your bankruptcy trustee, the person who oversees your repayment plan to creditors.

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    How Bankruptcy Can Affect Your Ability To Get A Mortgage

    Bankruptcy can significantly lower your credit scores, remain on your credit reports and affect your ability to obtain credit, including a mortgage loan, for up to 10 years. Fortunately, its impact lessens over time.

    For a lender to even consider you for a mortgage after bankruptcy, your bankruptcy must be discharged. A bankruptcy discharge is a court order that eliminates your debts. In addition to making sure your bankruptcy has been discharged, a lender will look at your credit report to determine your creditworthiness.

    It’s a good idea to check your credit report before you apply for a home loan to make sure it’s accurate. Look for mistakes such as incorrect or outdated information or accounts that were not included in your bankruptcy filing that are listed as part of it. Be sure to contact the credit agency as soon as possible and dispute any errors you find.

    When you do begin to apply for a mortgage after bankruptcy, your lender will likely ask you a few questions about your bankruptcy. They may ask you when your case was discharged, what you’ve done to establish new credit, and how you’ve been keeping up with your bills. It’s a good idea to have the answers to these questions ready beforehand so that the application process runs smoothly.

    Let’s dive deeper into how each type of bankruptcy can affect your ability to get approved for a mortgage.

    Getting A Mortgage After Bankruptcy: Waiting Periods

    Understand itll take time to rebuild the trust needed for lenders to consider your application. In most cases, the soonest Rocket Mortgage® can help you refinance your house or get into a new one is 1 year after the discharge or dismissal of your bankruptcy.

    The length of the waiting period depends on the type of bankruptcy you filed and the type of loan you want to get.

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    After You’ve Filed For Chapter 13 Bankruptcy

    Filing for Chapter 13 bankruptcy is a three- to five-year processbut that doesn’t mean that you can’t buy a house during that time. You can obtain an FHA loan before you complete your plan if you meet the following conditions:

    • You’ve paid 12 months of plan payments.
    • The court approves your request to purchase a house with an FHA loan.
    • You can demonstrate that the reason you filed for bankruptcy is unlikely to occur again.

    Keep in mind that the court might not be on board if you’d have to reduce the amount paid to your creditors in your plan to qualify for a home loan. And if you have to present the terms of the house purchase in your motion , you might have a hard time closing the deal. Many sellers would be unwilling to take their house on the market on the chance that you’ll obtain the necessary court approval.

    If you’re considering this option, you should consult with a knowledgeable bankruptcy attorney before filing. A lawyer can advise you about the feasibility of a future loan qualification and, if possible, assist you by putting together a repayment plan that will help you reach your goal.

    Waiting Period For Chapter 7 Bankruptcy

    Buying a house after bankruptcy

    If you get to keep your home, you wont be able to qualify for a refinance right away. Youll need to wait a few years after the court discharges your bankruptcy before you can apply for another home loan.

    The waiting period to refinance after a Chapter 7 discharge varies by the type of mortgage you have:

    • FHA loan: 2 years
    • Conventional loan: 4 years
    • Jumbo loan: 7 years

    These multi-year waiting periods allow the lender to see if you can manage your remaining debts after the liquidation. It can be more difficult to refinance after filing for Chapter 7 than Chapter 13 since the waiting periods are longer and the event remains on your credit report for three extra years.

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    After Bankruptcy How Long Till I Can Get Another Mortgage

    Q: How long after chapter 13 bankruptcy discharge with a lien strip can I finance a new home?

    A: According to Fannie Mae, to obtain a new Fannie Mae-backed mortgage after a Chapter 13 bankruptcy, the waiting period is two years from the discharge date or four years from any dismissal date. Freddie Mac’s guidelines note a 48-month period for a Chapter 13 bankruptcy caused by “financial mismanagement” or two years from the discharge date.

    For FHA-backed loans, it appears the period is only one year, provided you can get the creditors in your plan to provide payment histories that show you have been on time with your payments, plus you’ll need permission from the court to enter into a new mortgage transaction.

    What About Multiple Bankruptcies

    The government-backed mortgages do not mention multiple bankruptcies in their guidelines. Conforming loan underwriting does consider them, however, if you file more than once during the most recent seven years. The guidelines read:

    For a borrower with more than one bankruptcy filing within the past seven years, a five-year waiting period is required, measured from the most recent dismissal or discharge date.

    But those with documented extenuating circumstances get a break. The extenuating circumstances must apply to the second bankruptcy. because it would be pretty hard to prove that the problem is unlikely to recur if it already has. Fannie Mae says:

    A three-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the most recent bankruptcy discharge or dismissal date. The most recent bankruptcy filing must have been the result of extenuating circumstances.

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    Chapter 7 Bankruptcy Refinancing Waiting Period:

    You must wait for a period of two years, post-discharge, to properly qualify for a government-backed residential mortgage refinancing. The waiting period for a conventional home loan can be as long as four years. However, some lenders have conventional loan programs that require less of a waiting period. Remember this shorter waiting period is entirely dependent on the qualifying criteria of the borrower.

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    Unfortunately, those who have been in this situation will have to hold off on their home buying aspirations. The court requires you to wait a minimum of four years from your dismissal date before you can apply for a mortgage. If your Chapter 13 was discharged, the seasoning period is four years from your filing date and two years from your dismissal date.

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    If You Have Good Credit

    If you have good credit but need bankruptcy, trying to refinance after bankruptcy will likely result in difficulty. While you will have less overall debt after a bankruptcy, your credit score could take a significant dive, which will affect your ability to obtain a loan. People with good credit do file bankruptcy for various reasons, and if your credit is good, it might be wise to refinance while that is still the case. Individuals with bad credit often receive high interest rates and unfavorable loan terms from nervous lenders.

    Example. Bob and Donna have excellent credit, but Bob has been stricken with a very serious and disabling illness and can no longer work. They can afford their house with Donna’s income alone, but they know they will no longer be able to keep up with their other debts. They want to refinance the house to get a lower interest rate, but they also want to file bankruptcy to deal with their other debts. They decide to refinance first, since they have good credit and they know the bankruptcy will lower their scores significantly and reduce their chances of getting the loan they need quickly.

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    What Are Usda Loans

    USDA loans are backed by the U.S. Department of Agriculture for low-and-middle-income borrowers who may not qualify for a conventional loan. The mortgages have low down payments and no closing costs for those who buy a home in a qualifying rural area, which includes about 97% of the U.S. A borrowers income cant exceed 115% of the median income for the area. Mortgages are 30-year, fixed-rate.

    While the USDA doesnt set a minimum credit score, most lenders who process USDA loans require a minimum of 640.

    Waiting period for applicants who have filed for bankruptcy:

    • Chapter 7 Eligible three years after discharge.
    • Chapter 13 Eligible after 12 months if theyve stuck to their plan payments.

    Choose The Right Lender

    Can i Get A Mortgage after bankruptcy?

    Getting the best deal on a refinance loan after bankruptcy means doing some careful research. Some of the things you need to consider when comparing lenders are the interest rate youre approved for, the fees and the waiting period requirements. For example, you cant refinance into an FHA loan until at least two years have passed from the date your case was discharged.

    You can compare rates online or call lenders in your area to ask about refinancing programs for homeowners with less than stellar credit. If you cant find a lender whos willing to work with you or the rates youre being offered are still too high, it may be a sign that you need to give it more time.

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