You may be very interested to know that your ability to refinance your mortgage after you have filed for and been discharged in bankruptcy is not impossible. Bankruptcy is not the stigma is was even 20 years ago. In fact, many mortgage lenders will certainly consider refinancing your mortgage after a bankruptcy because the risks are extremely low to the lender. In the lender’s mind, you are actually a better credit risk post-bankruptcy than before you filed, because you cannot file again for ten years. So, your lender concludes, if you don’t make your payments, they can take control of your assets and you can’t hide in the bankruptcy system.
It could take a couple of years.
You’ll probably need to go to a sub-prime lender to obtain financing for your home if your bankruptcy is less than two years old. Your rates will definitely be higher than conventional rates. However, two years or more after your bankruptcy, many conventional lenders will consider your loan application. If you have attempted to rebuild your credit beginning immediately after the bankruptcy by getting a new credit card and making payments as promised, you may be able to negotiate better financing.
From the perspective of the mortgage lender, someone who’s gone through a bankruptcy is operating with a “clean slate”. More than likely, all previous debt or the better part of it has been either erased or paid off, or in some cases, the debt has been written off. To that end, the mortgage lender is looking at the applicant as someone who has more money to spend in the future, because they have less debt, not someone who has the money problems of the past. You also have to remember that a mortgage is a secured loan. Like all secured loans, the front end payments go primarily to interest while the back end payments take care of the principal. So, if someone is going to default on a home mortgage, the banker is going to actually be paid first.
Give yourself a fighting chance.
If you have the cash, consider a down payment of up to 50% when applying for a mortgage. This can actually lower that extremely high interest rate during the first two years as well as provide you with a smaller monthly mortgage payment. You’ll also want to show cash reserves sitting in the bank of between two and three months’ mortgage payments when applying for the loan.
Getting a mortgage after bankruptcy isnt easy but if there is usually a lender out there who will be willing to offer you a decent rate.