Not many homeowners know what to do with their mortgage when faced with the possibility of bankruptcy. If you’re one of them, you’re at the right place! The good news is that many financing options are available to you, including mortgage refinancing; however, those options are dependent on different scenarios and specifications.

Did you discharge the mortgage during bankruptcy? Are your payments current? Did your bankruptcy include a second mortgage? These are possible scenarios that influence your claim for a mortgage to refinance after bankruptcy.

You need a friendly mortgage lending expert to help you navigate the murky refinancing waters. Fortunately, Oso Creek Mortgage offers convenient mortgage refinance solutions that can help. This blog post explores a few scenarios and addresses some misunderstandings and misinformation surrounding mortgage refinance after a bankruptcy.

Mortgage Inclusion in Bankruptcy

Many homeowners believe a mortgage in your bankruptcy statement is equivalent to no longer owning the place. This is untrue, you continue owning your home, despite the bankruptcy, and if you continue making your payments, the lender cannot take it away. Unless ordered by an authorized federal bankruptcy judge, you have the option of making payments and even seeking a mortgage refinance despite filing for bankruptcy.

Bankruptcy Waiting Periods

You can refinance a discharged mortgage during bankruptcy as long you meet the waiting periods specified for the mortgage you need to refinance your home. Pay close attention to the following details and guidelines:

Chapter 7 or 11 Bankruptcy

Chapter 7 bankruptcy is when you liquidate assets to pay off debt. This type of bankruptcy eliminates most debts within three to six months but may stay on your credit report for up to 10 years.

• VA Guaranteed Mortgage – 2 years to refinance from dismissal or discharged date.
• Conventional Mortgage – 4 years to refinance from date of discharge or dismissal.
• USDA Guaranteed Mortgage – 3 years to refinance from date of discharge or dismissal.
• FHA Government Insured – 2 years to refinance from the date of dismissal or discharge.

Chapter 13

A Chapter 13 bankruptcy allows you to keep your assets and repay all or some of your debts over three to five years.

• VA Guaranteed Mortgage – 2 years to refinance from discharge or dismissal date
• Conventional Mortgage – 4 years to refinance from the dismissal date, or 2 years from discharge
• USDA Guaranteed Mortgage – 3 years to refinance from the date of dismissal or discharge
• FHA Government Insured – 2 years to refinance from the date of dismissal or discharge.

How to Prove an On-Time Payment History

The mortgage no longer shows on your credit report once your bankruptcy is discharged. Many lenders claim that you have to re-affirm the original mortgage before you can refinance; however, this could not be more distant from the truth!

Documenting your mortgage payment history is pretty easy; all it requires is for you to request a payment history from your lender or loan servicer. Suppose you have made all of your payments on time. In that case, this document will reflect that, and you can use it as supporting evidence to prove that you’re a responsible borrower.

Second Mortgage Included in Bankruptcy

Suppose you add another mortgage in your bankruptcy but continue making payments on the first one. In that case, you’re still eligible to refinance with the help of a conventional Fanny Mae underwritten loan, despite not making payments on the second mortgage. The key, however, is ensuring you avoid removing a second mortgage lien as a result of refinancing if you have enough.

Ideally, if you have enough equity, you should just pay off the second mortgage in full. If the second lien holder agrees to an amount less than the one owed, that works too. You simply need a pay-off quote from the lender, specifically quoting the amount they will accept.

If you’re considering refinancing your home loan after filing for bankruptcy, our team at Oso Creek Mortgage serving Santa Ana, CA is here to help. Schedule an appointment today, and let us show you how easy it can be to refinance your mortgage – even with a bankruptcy on your record.