I am not going to attempt to give you advice or guidance on whether you should file for a bankruptcy or not. What I do want to do is let you know how a lender will treat your bankruptcy.
First of all, having a recent bankruptcy on your credit is not an insurmountable problem. There are a lot of borrowers out there refinancing that have a BK on their credit report. Here are some things to keep in mind when preparing to refinance.
· You can refinance even if your BK was discharged less than a year ago
· You can refinance before you BK has been discharged
· Your score does not always dip under 500
The information I provide here will not be applicable to every lender, as each has its own guidelines, however lenders are surprisingly similar.
In all three of the places I worked, they allowed borrowers to refinance before a year had passed since the discharge date. There are some strict guidelines though, and you and your loan officer need to do some research before submitting a loan. One of the guidelines has to do with acceptable loan to value. Most lenders will only allow you to borrow 50 to 60 percent of the home’s value and that right there can kill a deal.
Many times borrowers are driven to bankruptcy due frequent refinancing that has eventually stripped all the equity out of the home making it impossible for just one more refi. Now the borrower is saddled with too much debt and a house note they can no longer afford. Unfortunately for the borrower this in this situation, there is usually not enough equity left to qualify for a refinance and they are stuck with the BK. Do your footwork, find out how much your home may be worth then start crunching the numbers. It’s a lot better to find out you don’t have enough equity before the loan is in process. If your bankruptcy is structured where you are making payments then you will need to get a bankruptcy rating, similar to a mortgage rating. Your bankruptcy is viewed as your last hope, so if you have had issues making your bankruptcy payments or are behind, most likely your lender will not want to refinance.
If you are unable to refinance prior to discharge, many lenders will refinance you even though it has been less than a year since discharge. If you or your lender is unsure of the discharge date look through your credit report and it is usually reported there. It is a good idea though to keep your discharge paperwork because that will also show the date of discharge. It will also list all of the debtors covered in the bankruptcy which can be a godsend if some of the companies on your credit report still show as active and not covered in the BK (Bankruptcy).
Lenders will look closely at your post BK credit history, and if that is rocky, your score may not have recovered enough to make a loan possible. Some lenders will still shy away from a borrower who has post BK dings even though his credit is above 500 because is leads the lender to believe nothing has changed with the borrowers spending habits. The lender will think that there is going to be another BK or a foreclosure in the near future.
So, while you can still refi right after a bankruptcy, the odds are pretty much stacked against you. You should keep in mind that your BK will stay on your report for at least seven years, if not ten. Clean up your act and show you have learned something through the BK. Keeping your post BK report squeaky clean will go along ways in demonstrating what you have learned.
If you have a perfect bankruptcy rating, enough equity, and a tri-merged score above 500 you may be a good candidate to refi out of the BK and that will be reflected well on your credit report. You may find your lender is going to be tighter with income guidelines, and you may need to be able to show all your income in the traditional way with W-2’s and pay stubs.
So good luck with the BK and happy searching for a loan.
Featured - Home Equity Line Of Credit Rates 2024
Third Federal Savings and Loan |
Intro APR 7.240 %
After Intro: 7.240 %
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Conditions… Variable APR of Prime minus 1.01% in all states. Min loan amount $10,000. Max loan amount $200,000. 30-year term. Annual fee waived for the first year. See conditions for guarantee at thirdfederal.com.
- Third Federal rate are typically 20% lower than other leaders
- Guaranteed Lowest Rate
- No closing costs, prepayment penalties, or minimum draw requirements
- 10 year draw period
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District Lending |
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HELOC, HELOAN or CASHOUT REFI all available.
- No Lender Fees
- Fast
- Easy
- Over 20 Years Experience
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Upstart |
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1. APRs for initial advances range from 8.25% to 18.00% based on funded HELOCs as of September 2024. Your actual rate will depend on many factors such as your credit history, loan-to-value ratio, line amount, loan term, lien position, and property state. The lowest rates are only available to the most qualified applicants. The APR is variable, but the APR that will apply to each draw will be fixed on the date the draw is made.
2. As of October 2024, 10% of funded HELOCs achieved a closing timeline of 6 days or less and a funding timeline of 10 days or less. This timeline assumes consumers close with our remote online notary, provide supporting documentation promptly, and ensure the information provided is accurate and consistent with our verification process. Delays, discrepancies, and other unforeseen factors may impact the closing timeline. MBA’s 2024 Home Lending Study reports an average industry closing time of 31 days.
3. A Home Equity Line of Credit has a variable rate. The APR may change, but the APR that will apply to each draw will be fixed on the date the draw is made. Your APR will be the Prime Rate at the time of draw plus a margin fixed for the life of the HELOC.
- As low as 8.25% APR on your initial draw*
- Get your money up to 5x faster than the industry standard*
- Fixed rate on each draw*
- No paperwork needed to apply
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AmeriSave Mortgage Corporation |
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• Home Equity Loans & Refinance – Cash out
• Customized rate quote with no impact to credit
• Low Rates, Quick Approvals, Wide Range of Products
• Over 100 Billion Funded. 22 Years in Business
- Home Equity Loans & Refinance – Cash out
- Customized rate quote with no impact to credit
- Low Rates, Quick Approvals, Wide Range of Products
- Over 100 Billion Funded. 22 Years in Business
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New American Funding, LLC |
0.000 %
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Cash-Out and Home Equity Options Available.
- Home Improvement, Buy a Vacation Home
- 303k+ positive reviews, A rating from the BBB
- Pay off higher interest rate credit cards, Pay college tuition
- 100% online mortgage application available
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CrossCountry Mortgage, LLC |
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Please note that the interest rates offered are subject to change based on market conditions and borrower eligibility. The pricing and rate provided are accurate as of the specified date. It is important to be aware that the minimum loan amount for any loan program is $50,000. The specific amount and terms of the credit offer will be determined based on underwriting approval and guidelines, which include factors such as your credit history, your ability to make payments, and the available equity in your home.
To qualify for this offer, you must meet the required criteria and demonstrate creditworthiness. Additionally, providing up to two years of income verification may be necessary. The severity of your credit may also impact the required down payment. It is crucial to understand that the lender reserves the right to cancel this offer if the provided information cannot be verified.
Please note that all bankruptcies must be discharged in order to be eligible. This offer is nontransferable and is specifically available for single-family residences or owner-occupied condominiums. Please be aware that mobile homes and cooperatives are not included in this offer. It is important to note that the lender must hold a valid first lien position, and property hazard insurance is a requirement.
These are some key details to consider when evaluating this offer. It is essential to thoroughly review the terms and conditions and seek clarification from the lender regarding any specific questions or concerns you may have before proceeding with the application process.
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Figure Home Equity Line |
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The Figure Home Equity Line is an open-end product where the full loan amount (minus the origination fee) will be 100% drawn at the time of origination. The initial amount funded at origination will be based on a fixed rate; however, this product contains an additional draw feature. As the borrower repays the balance on the line, the borrower may make additional draws during the draw period. If the borrower elects to make an additional draw, the interest rate for that draw will be set as of the date of the draw and will be based on an Index, which is the Prime Rate published in the Wall Street Journal for the calendar month preceding the date of the additional draw, plus a fixed margin. Accordingly, the fixed rate for any additional draw may be higher than the fixed rate for the initial draw.
- Fastest way to turn home equity into cash
- Flexible terms, redraw up to 100%, borrow $20k-$400k
- Approval in as little as 5 minutes. Funding in as few as 5 days.
- Use to consolidate debt or finance your next home project
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PenFed Credit Union |
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Interest-only payments during the 10-year draw period
- Home Equity Line of Credit - Equal Housing Lender
- Loans Amounts from $25,000 - $500,000
- Get a HELOC from PenFed to Put Your Home Equity to Work
- HELOCs Can Offer Lower Rates Than Credit Cards or Personal Loans
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