This may surprise you, but it is possible to refinance your first mortgage or your second mortgage after bankruptcy. As a matter of fact, it could help you rebuild your FICO credit score to a good standing. Six months after your bankruptcy has been discharged or finalized, you'll find that lenders are actually willing to refinance your mortgage. Particularly, if you have a variable interest rate home mortgage or second mortgage, refinancing could save you thousands of dollars because mortgage rates are quickly climbing, and now is the time to refinance into a fixed interest rate home loan. Even if you don't have a variable interest rate mortgage, but rather several secured debts that were not discharged by your bankruptcy (like a car payment or student loans), you could save a lot of money with a debt consolidation home loan. You probably will pay a higher interest rate under a "bad credit" loan with a sub-prime lender. But, you could still save money by refinancing your first mortgage or second mortgage home loan. The following tips will help you find the best possible refinance mortgage loan options. 1. Right after your bankruptcy is discharged, start preparing to refinance your first or 2nd mortgage loan by establishing good payment history. Pay your bills and current mortgage(s) on time each month. This will start to raise your credit score. 2. Get your credit reports from all three credit bureaus--Experian, Equifax and TransUnion and make sure your bankruptcy accounts are accurately reported. Chances are all the 30 day, 60 day, 90 day, collection, and charge-off derogatory information will still be on your credit reports for the accounts that were discharged by your bankruptcy. Thus, the first thing you need to do is to make sure all these accounts are updated to say "included in bankruptcy." Under the Fair Credit Reporting Act (FCRA), both the consumer reporting agency and the information providers (creditors) are responsible for correcting any incorrect, incomplete or outdated information in your report. Otherwise, your credit score will be unnecessarily lowered, and you will probably more interest on your loan than you should. 3. Start researching mortgage lenders. Remember to keep interest rates, points and fees in mind, as well as the costs involved with refinancing. You definitely will pay a few percentage points more than a traditional mortgage, so try to shop for a loan package with low fees. 4. Because of your bankruptcy, you are a target for predatory lending practices. Be sure you know the going rates for bad credit loans with sub-prime lenders, pay close attention to the terms of a loan including the type of mortgage, the presence of prepayment penalties, balloon payments, low or high down payment, mortgage insurance requirements, payment schedule, lock-in period and other loan features before signing the papers. 5. Know your legal rights. The Federal Reserve Board states that according to federal law, you have three business days after signing the loan papers to cancel the deal for any reason, without penalty. You must cancel in writing within the three-business-day window of time, and the lender must return any money you have paid to date. This legal protection is for all consumers, even ones who are bankrupt. 6. Once you've refinanced your first or second home loan or debt consolidation loan, and you've kept up your payments on it, and all your other bills, shop for a new loan in about two years. You should get a much better interest rate and loan package. |
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