Refinance After Bankruptcy - How Does Your Bankruptcy Affect Home Mortgage Refinancing?
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There are a few basic concepts one should know when looking
into refinancing a mortgage after a bankruptcy. Most
importantly, you need to know the two different types of
personal bankruptcy that you can declare.
Chapter 7 Bankruptcy, often called “straight bankruptcy”, is an
attempt for someone financially overextended to liquidate most
of their assets to satisfy creditors, keeping only a few
personal assets needed for the basic necessities of life such as
an economical car, personal clothing, etc.
In Chapter 13 Bankruptcy, your assets are not liquidated.
Instead, you come to an agreement with an appointed trustee
where late charges and other penalties are eliminated and you
start a payment plan to repay much of the debt owed. This
process can take over a year or two, but will allow you to
retain belongings (and property). Also, it is looked at more
favorably by lenders because you are attempting to repay your
debts, not just write them off. Lenders will look at both the
date the bankruptcy was filed and when it was discharged.
A Chapter 13 Bankruptcy “buyout” is a refinance loan, taking
out a new loan to cover the existing mortgage and some or all of
the other debts. This is basically considered a “cash-out”
refinance. Most Chapter 13 Bankruptcy refinance loans are
limited to roughly 85% of the value of your home.
When refinancing out of a Chapter 13 Bankruptcy, or soon after
a Chapter 7 or Chapter 13 Bankruptcy, you will almost certainly
be working with a sub-prime or “non-prime” lender. These lenders
specialize in helping borrowers with blemished credit histories.
Often, borrowers refinancing near the time of a bankruptcy will
seek the assistance of a mortgage broker, many of whom have
experience with this type of loan. If possible, it is best to
wait at least two years after the discharge of your bankrupty to
refinance your mortgage. This will help you to receive a better
interest rate. Start now to pay your bills on time and in full.
This will help to repair your credit and give you even better
chances of a lower rate.
About The Author:
http://www.mortgagesanity.com/2007/02/08/bad-credit-mortgage-companies/
- We maintain an updated and current list of mortgage companies
online who service borrowers with credit problems.
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