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Mortgage After Foreclosure and Bankruptcy
We live in NC and filed a Chapter 7 bankruptcy on our business, and a Chapter 11 on the personal side after COVID closed our business. Both my husband and I had upper 700’s for credit before. Ch11 was confirmed on Feb ’21, and the final decree was issued on 11/12/21. We have a home mortgage
and HELOC, as well as our SBA loan debt repayment, which we’d like to roll into one mortgage with a refi. The SBA loan repayment will be repaid by the end of 2022, but there is no penalty to repay early if we could refinance. Are we just out of luck with a refi and have to wait 2 years or is there any option to do a refinance now with a decent rate?
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Refinancing after Chapter 11 bankruptcy is often extremely tough. The goal of this article is precisely to provide a granular understanding of how refinancing can be done after filing for bankruptcy while keeping in mind the important factors that affect the situation.-
The Waiting Period
Chapter 11 Bankruptcy: In Chapter 11 bankruptcy, relatives sometimes have to wait and remain in the queue. Re-amortizing your mortgage can take 2 to 4 years after the Chapter 11 discharge. It is important to note that this might depend on the particular lender.
FHA Loans: FHA loans are for borrowers who are considering an FHA loan. As per the requirements, the borrower is required to wait for two years after the bankruptcy claim is discharged. However, this is only if the borrower is able to reestablish a healthy credit.
Conventional Loans: For conventional loans, however, this waiting time usually extends to four years following the discharge of the revolving doors of Chapter 11.
How it Affected My Credit Score
Rebuilding Credit: As per post-bankruptcy reports, your credit scores were recorded in totality before the bankruptcy, up to around the upper 700s. It is time to concentrate on rebuilding your credit as much as you can. If, however, your scores were still outstanding after the bankruptcy, then it is likely that other options are going to open up for you as well.
Current Credit Score: This being said, if your credit scores are still low and the lenders are still targeted and working on pre-hold specific angles, then yes, some of them would be willing to work with borrowers after a while, even when the post-chapter incident period has not fully lapsed.
What Could be New Suggestions?
Non-QM Loans: Non-qualified mortgages, or, as some lenders would say, Non-QM loans, are those types of loans that allow for relaxed guidelines as far as bankruptcy cases go and, in turn, allow for requalification. These types of loans tend to be more easily targeted with approval than traditional loans, i.e., they cater to unideal borrowers.
Loans for Patients with Bankruptcy History: If you are looking for a bankruptcy refinance loan service, you might consider applying to banks or credit unions that are known for being lenient towards borrowers who have gone through bankruptcy.
Paying Off All Credit Debts with One Mortgage
Mortgage Combination: It is better to take out a HELOC ($55,000), combine it with your existing mortgage, and pay off everything with one loan. But remember the implications of having a bankruptcy history and how it can lead some lenders to charge sky-high fees.
Loan-to-Value (LTV): If you want to refinance and increase your equity while consolidating loans, ensure your property qualifies for the refinance. Lenders usually offer reasonable rates for LTV ratios equal to or below 80%, which is quite favorable.
Meeting a Mortgage Broker for Assistance
Pre-Qualifications: You can contact a loan mortgage broker or a lender so they can review your case and advise you on what you could do. They would also know which bank can overlook your bankruptcy while approving you for a loan.
Terms Understanding: Ensure you are clear about any potential conditions for the draws of your refinanced offer, like stipulations for the interest rates or specific pre-payment fees.
We understand that your Chapter 11 bankruptcy will affect your ability to refinance. However, you may still have some options, especially regarding non-QM loans. It is recommended that you contact a professional in mortgage brokerage to help you find the best way to repay through debt consolidation strategies. If you have any further inquiries or want to know more about the topic, please don’t hesitate to ask!