How Soon Can Debtors Refinance A Mortgage After Bankruptcy?

Refinancing a Mortgage After Bankruptcy

Within a year or two after receiving a bankruptcy discharge, many debtors can refinance their mortgages under certain circumstances.

Let’s take a look at a few qualities mortgage lenders look for in post-bankruptcy debtors:

Payment History

Mortgage lenders want to see at least 12 consecutive months of on-time mortgage payments before they are willing to take a risk on a post-bankruptcy debtor.  This means that if a post-bankruptcy debtor pays on time for six months and then pays late for two months, they probably won’t qualify for a mortgage refinance.

Credit Score

Mortgage lenders want to see that a debtor’s credit score has improved after bankruptcy.  This is easily done by getting secured credit cards after bankruptcy and making sure that you pay all of your bills on time.  Post-bankruptcy debtors should check around with different lenders to find out how their credit score impacts the interest rate they can expect as well as their ability to gain approval for the mortgage refinance.

Home Value

Mortgage lenders won’t show much interest in properties which are severely underwater. Even if a debtor’s credit score and payment history are greatly improved after bankruptcy, refinancing a mortgage attached to a severely underwater property will be nearly impossible.

If a post-bankruptcy debtor is hoping to refinance their mortgage, they should take care to establish all of the above points before applying.  While improving your payment history and credit score can be easily done with time and effort, housing values is another issue.  If housing values are in the way of getting a home refinanced after bankruptcy, speak with a financial advisor about other options.