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How to refinance after consumer bankruptcy

On Behalf of | Apr 28, 2022 | blog, Consumer bankruptcy |

Refinancing your home in Tennessee after you have gone through bankruptcy is possible. You may have to meet certain conditions to apply for a refinance, depending on the lender.

Eligibility for refinancing

The type of loan you have influences how long after the consumer bankruptcy you can refinance your home. The type of bankruptcy also plays a role in whether you can refinance. If you filed for Chapter 7 bankruptcy, you may be able to refinance your home after one year of your discharge date with FHA and VA loans. Conventional loans may have a waiting period of up to four years.

If you filed for Chapter 13 bankruptcy, FHA loans usually require that you make payments for at least a year before you refinance the mortgage. After a reorganization bankruptcy, the waiting period to refinance a VA loan is one year. If you have filed for bankruptcy more than once within a seven-year period, then the waiting period is five years regardless of the type of loan and bankruptcy.

Check the requirements of your lender to know any other eligibility conditions. Some lenders set a minimum credit score you must have to refinance after a consumer bankruptcy. They may also want to see a reasonable debt-to-income ratio and equity in your home.

Apply for a refinance

After you confirm that you meet the requirements, you can apply for a refinance. Gather the important documents your lender will need to see. They will let you know what to bring to the meeting. This typically includes your past two W-2s, past two bank statements and past two pay stubs. Self-employed individuals may need to provide additional information.

Some lenders offer a mortgage rate lock, which will guarantee the interest rate they told you at the time of your application for a set period. Mortgage rate locks typically last for 30 or 60 days. Interest rates fluctuate daily, so it’s a good idea to ask for a lock.

Prepare for a home appraisal

Most lenders conduct a home appraisal to confirm that they aren’t lending you more than your home is worth. You should make sure your home is in good condition before the appraisal.