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.