As homeowners emerge from a traumatic bankruptcy, it usually takes a couple years before they start looking at their finances again. But it’s not unusual for them to look to refinancing when they do.
The factors that force borrowers into bankruptcy in the first place often result from high mortgage interest rates as well. So, monthly mortgage payments are typically a burdensome expense, even if it is one of the few remaining, after a bankruptcy. And refinancing is a great way, especially with today’s record-low rates, to relieve some of that burden.
It’s not easy to refinance after bankruptcy in Colorado. But it’s certainly not impossible. And the more time between the bankruptcy and your refinance, the easier it gets.
There are a few options and limitations to refinancing after a bankruptcy.
When can you refinance after a bankruptcy with a conventional loan?
Fannie Mae and Freddie Mac, the agencies that buy most mortgages today, require four years to pass after a Chapter 7 bankruptcy discharge before they will consider buying the loan. Only two years needs to elapse after a Chapter 13 bankruptcy discharge.
When can you refinance with an FHA loan after a bankruptcy:
FHA loans are significantly easier to get after a bankruptcy. The FHA requires two years to have passed after a Chapter 7 bankruptcy discharge, though it will make an exception and consider borrowers one year after bankruptcy as long as they can show the bankruptcy was caused by extenuating circumstances and that the cause is no longer a threat to the borrower’s finances.
In order to qualify for an FHA refinanced mortgage after a Colorado bankruptcy, borrowers also have to have re-established good credit and demonstrated ability to act financially responsibly.
Freedom Financial Services requires a minimum credit score of 600 for borrowers wanting to refinance who have been through bankruptcy.
Borrowers who can qualify to refinance with FHA and originally had an FHA loan, can use the FHA Streamlined refinancing program even after a bankruptcy.
There are always options for homeowners wanting to refinance, even if they have been through bankruptcy. The mortgage experts at Freedom Financial Services can help homeowners find a refinancing program that will work for them.
To learn more about the refinancing process download our free 11-page guide: Refinancing Fundamentals 101: A Beginner’s Guide to Home Refinancing.