Refinancing After Bankruptcy

November 19, 2010

Refinancing after a bankruptcy can be a very challenging task but it can be a lot easier. Six months after your bankruptcy has passed, you can research on willing lenders to refinance your mortgage. In fact, there are many lenders who are willing to extend refinance after bankruptcy, although interest rates are higher than the average. Refinancing mortgage is a wise decision if you just got out of bankruptcy. This helps rebuild your credit standing in about two years. Here is a simple refinance guide to help you look for the best refinance lender in your area.

How to Refinance After Bankruptcy

After you have gone out of bankruptcy, you have 6 months to prepare yourself for refinancing. You can start by establishing on time payments to your bills and current mortgage.  You may open a credit card account to start rebuilding a good credit history. At this time, you may want to consider having an extra income to raise funds for a savings account. Remember, when you have more cash assets, you will have better chances in your application for refinancing.

When you are ready to refinance, ask people you know who were able to get refinancing with bad credit. They may possibly refer you to their mortgage lenders who can extend you some good rates too. You may also do your research mortgage lenders and their rates online. You can easily compare online mortgage websites. Compare refinancing quotes particularly interest rates and fees. Slightly higher rate with low fees usually offer the best mortgage deal.

With bankruptcy on your credit report, expect to work with sub prime lenders. They offer their rates at a fewer points higher than the average mortgage.

When choosing your refinancing package, shy away from opportunities and chances to cash out part of your home’s equity – looks for the best mortgage deals available. This will just jeopardize your chances of improving your credit. Keep your home equity in place to ensure substantial improvement on your credit standing.

Read on the terms and conditions carefully. If the context is too vague for you to understand, ask questions. Make sure that you understand all the details stated on it then you can finish your application on line. Refinancing mortgage quotes may change as it varies according to market rates so expect some slight changes when your application has been approved.  Before your application is finalized, review the loan again. Make sure that everything is in place accordingly.

With your refinancing completed, your credit standing is building up. Plan to refinance your loan after 2 years to avail a lower interest rate. Regular payments are important for substantial results in improving your credit. You may opt for auto debit payments so as not to miss on any repayments schedule. Remember there is a difference between on time payments and current payments. Get in touch with your bank to set your account in auto debit transactions.

Review your credit report every 6 months. You can get a copy of your credit score from 3 major credit bureaus; Experian, Trans Union and Equifax. Correct any discrepancies in the report if you found one. With a solid credit history behind you, you can apply to traditional mortgage lenders. So if a friend asks you, “Can I refinance after bankruptcy”, tell them the answer is yes.

How to Refinance

November 19, 2010

Refinancing home mortgages may mean paying off your existing mortgage with a new loan. Many home owners are considering refinancing for various reasons. Common reasons are getting a better rate from high adjustable interest to a lower fixed interest – or even refinancing after bankruptcy. This can also be a way for home owners to have lower monthly payments or take out cash against their home equity to support urgent financial needs.

Steps to Refinance a Home Mortgage

  1. The first step is to determine if you are qualified to refinance. Lenders allow refinancing when you made at least 12months of payment to your mortgage. Know your reasons why you should refinance. Your reasons will help you decide on the right time to apply.
  2. After your reasons are established and you finally decide that refinancing is your only option, talk to your lender. Your lender may give you flexible terms in refinancing. They may even waive some refinancing fees and other costs involve. You can get sufficient guidelines and assistance on how to refinance your home. Your original lender can extend services beyond their limitation to keep their existing customers so it is best to approach them first. If you feel you are not getting the right service from your current lender then you may opt to change lenders.
  3. Find a lender who can offer the best mortgage deals in refinancing.
    1. Banks. Talk to your bank as they are already familiar with your credit history. They may offer you flexible terms and interest rates too.
    2. Mortgage broker. They are the best people who have access to various lenders. They can refer you to a lender who can offer the best deals in refinancing.
  4. In your search for lenders, it may be difficult to pinpoint the best and reliable lender. Compare lenders according to how much savings you are going to get against the total costs. It is also important to consider the costs of refinancing against sticking to your original loan. Remember that there are penalties involved if you decide to refinance your home. So if costs are greater than rewards, it may be better to stick to your original loan.
  5. When you are decided on a lender, go through the application process. You may apply online, through the phone or through paper application. Your loan officer will have to review your credit score and appraise your property as a requirement to the application process. You have to provide them documents as proof of verifiable income. These documents are W2s, pay-stubs or copies of tax returns for self employed individuals.

Your application may process in a maximum of 4 weeks given that your papers are complete and there are no problems with your credit score. To avoid hassles and delays, let the bank or the lender know if you have a home equity line of credit or an existing second mortgage that you plan to keep. If this is the case, there may be additional documents involve such as a subordination agreement from your existing lender.

Refinance 2nd Mortgage

November 19, 2010

More and more home owners are looking for possibilities to refinance their second mortgage. Refinancing second mortgages offer borrowers funds that are placed against the equity of your home’s appraisal value. In order to have a better understanding on refinancing second mortgage, it is best to define what are second mortgage loans? Second Mortgage loans are loans being granted against the same assets of your first mortgage. A borrower has the option to refinance the first mortgage for a higher one or take out a smaller mortgage option.

For instance if your home is worth $300,000 and your loan balance on your first mortgage is $200,000, then the lender may qualify you for the 80% rule and allow you a second mortgage loan depending on your credit standing. After the first mortgage has been deducted ($300,000-$200,000) then you can still borrow $40,000 on your second mortgage. This is then recorded in county records offices and becomes a public record as there is a legal claim or hold against your property.

Choosing the Best Mortgage Deals

  • There are options to consider in refinancing second mortgage loans. The simplest option is refinancing from a high interest rate to a lower fixed rate loan which guarantees financial protection during inflation. You also have the option to refinance the first or the second mortgage or consolidate both in a single loan.
  • If you have multiple loans, it may be a wise decision to refinance your current second mortgage with your first loan into a fixed rate FHA mortgage. This can save you money by combining your first and 2nd mortgage together. You can also opt to take out a new 2nd mortgage loan and lock it into a fixed rate loan where its terms and payments are fixed for the duration of the loan.
  • Talk to your loan officer to get the best mortgage deals in refinancing. These people are qualified and knowledgeable about the loan process and its technicalities. They can give you a better deal accordingly.  Your loan officer can give you refinance guides and instructions on the process of refinancing 2nd mortgage loans. Part of their refinance guides are the required documentation that you need to provide. Be prepared with documentation that serves to show a good credit score and stable income history such as W2s and paystubs.
  • There are many cases that a borrower has a low credit score or has filed bankruptcy. This highly affects an application in refinancing. If this is the case, it is best to wait until you are able to improve your credit score or you should refinance within 6 months after your bankruptcy. Talk to your lawyer or your lender for other possible solutions.

In any refinancing or loan application, it is always advised to read the terms and conditions carefully so as not to be surprised at the end of the day. Learn to ask if you haven’t understood what is stated in the context. Therefore, it is important to have basic knowledge on loan processes and refinancing so as not to get lost in refinancing your second mortgage loan.