Original Q: I have been out of chapter 13 bankruptcy for 15 months. I want to refinance and lower my interest rate. Is that possible?
A: Unfortunately, you may have a while yet before you can get that refinance. According to Freddie Mac’s guidelines, the "recovery time period" for reestablishment of credit after a Chapter 13 bankruptcy is 48 months from the dismissal date, but this period is only in effect if the bankruptcy was "caused by financial mismanagement." If the bankruptcy was not due to your actions (i.e. overspending) but rather due to illness, income loss, etc., the period will still be 24 months from the discharge date. Fannie Mae has similar rules in effect of two years from the discharge date or four years from the dismissal date.
You may be eligible for an FHA-backed refinance, though. According to HUD, you will need to document that "one year of the pay-out period under the bankruptcy has elapsed, that your payment performance has been satisfactory and all required payments have been made on time, and you have received written permission from the bankruptcy court to enter into the transaction." If there have been less than two years since your discharge date, the loan will need to be manually underwritten, complicating the process.
- HSH.com’s annual outlook: 2019 Mortgage and Housing Market Forecasts
At the start of each year, HSH.com details the important factors we think are most likely to influence the mortgage and real estate markets in the coming year. Come each July, we review to see if our expectations are being met or not.
- What is a rate and term refinance?
Homeowners have a variety of reasons for refinancing and each reason can indicate that one refinance option or another makes the most sense.
- Are ten-year fixed-rate mortgages (FRM) available anywhere?
Sure! Virtually all lenders who sell product to Fannie Mae or Freddie Mac will be able to offer you mortgage with a 10-year term. However, interest rates are usually the same as the lender's 15-year offerings.
- What is HARP and do I qualify for a HARP loan?
Thousands of homeowners are still eligible to refinance under HARP. Are you one of them? Time is running out!
- How quickly can you refinance after a bankruptcy?
We have received a lot of questions over the years regarding how quickly you can refinance a mortgage following bankruptcy.