Refinancing can help you save money and access low interest credit. For
conventional rates, you need to wait at least two years after the
closing of a bankruptcy. However, there are reasons to refinance sooner,
especially if you are looking to rebuild your credit.
When A Bankruptcy Hurts
For the first two years after a bankruptcy, your credit score will be
significantly impacted. Right after discharge, your score hovers around
500, no matter how you are handling your credit payments. But soon your
score will begin to rise with each month of on-time payments.
After two years, your bankruptcy ceases to really hurt your score.
Instead, financing companies look at more recent payment history, debt
ratio, and income level. By practicing good credit habits, you can qualify
for prime financing 24 months after a bankruptcy.
Until then, refinancing rates will be 1% to 12% higher than prime
rates. The longer you wait to refinance, the better your rates. But there
are ways to improve your loan application.
Improving Your Loan Application
To offset your bankruptcy, keep new debt to a minimum. While you want
to start using credit to reestablish your score, don't open too many
accounts. Even if you aren't carry debt on those accounts, they will hurt
your credit score.
Building up your cash reserves is also important to financial lenders.
Ideally, they want to see at least two month's worth of reserves in
your savings. But to qualify for better rates, include even more in your
savings plan.
Other Financing Options To Consider
If you are simply looking for additional credit, consider applying for
a home equity loan instead. That way you can take advantage of your
equity and keep your low interest mortgage.
You may also decide to refinance with an interest only mortgage, at
least for the first year or two. Then you can refinance with your better
credit score later on. With this approach you decrease your monthly
payments and bet on improving your credit.
The best thing you can do for yourself when refinancing is to
investigate lenders. Go online to read about their financing options. Then
request loan quotes to compare offers from other companies. Not only will
you be saving time, but you will also get the best refinancing deal.
View our recommended lenders for after bankruptcy mortgage refinance loans online.
Also, check out our recommended sources for a credit report instantly online, or view our recommended sources for bad credit credit card companies online.
