How To Refinance After Bankruptcy in 2024 (2024)

FAQs

How soon after bankruptcy can you refinance your house? ›

Conventional Loans

Government-sponsored mortgage financiers Fannie Mae and Freddie Mac dictate their minimum requirements for lenders offering conventional refinance loans to homeowners after bankruptcy. They require lenders to wait 4 years after a debtor's discharge or dismissal date for a conventional loan.

Refinancing won't be right for everyone this year, but for some homeowners, it could have perks, including lower interest rates, reduced monthly payments or funds to pay off debts or other expenses. If you're not sure whether a refinance is a smart move for your money in 2024, talk to a mortgage professional.

Although it may be more difficult, you can still qualify for a loan following bankruptcy. It may be easier to qualify for a secured personal loan (such as a mortgage or secured credit card), which requires collateral.

You won't be able to tap the equity in your home immediately after filing for bankruptcy. Lenders generally require a waiting period of between one and five years from discharge or dismissal — and up to seven following foreclosure — before they'll approve you for a home equity loan.

You must wait at least two years after getting your Chapter 7 discharge to qualify for an FHA loan. For Chapter 13, borrowers may qualify while they are still in their repayment plan as long as they've made satisfactory payments for at least one year and received court approval.

Unfortunately, your credit will also take a major hit. If you've gone through a Chapter 7 bankruptcy, you'll need to wait at least 4 years after a court discharges or dismisses your bankruptcy to qualify for a conventional loan.

Conventional refinances: As little as 3 percent equity works for a rate-and-term refinance. For a cash-out refi, 20 percent is more the norm. FHA refinances: You'll need 20 percent down to pursue a cash-out refinance, but you can explore rate-and-term and streamlined refis with just 2.25 percent equity.

Most lenders require a credit score of 620 to refinance to a conventional loan. FHA loans have a 500 minimum median qualifying credit score. However, most FHA-approved lenders set their own credit limits. Rocket Mortgage^® requires a minimum 580 credit score to qualify.

In its July Mortgage Finance Forecast, the Mortgage Bankers Association predicts that mortgage rates will fall from 6.8% in the third quarter of 2024 to 6.6% by the fourth quarter. The industry group expects rates will fall to 6% at the end of 2025 and will average 5.8% in 2026.

This may be 12 months, but it can be longer depending on the exact circ*mstances of your bankruptcy and the length of the bankruptcy period. Most lenders won't offer car finance for people who have declared bankruptcy in the past. Once you're discharged, the more time that passes, the better your chances typically are.

What is the only loan that Cannot be discharged in bankruptcy? ›

Key takeaways. Loans, medical debt and credit card debt are generally all able to be discharged through bankruptcy. Tax debt, alimony, spousal or child support and student loans are all typically ineligible for discharge.

Most lenders require you to have at least 15% to 20% equity left in your home after factoring in the new loan amount. If your home's value has not appreciated enough or you haven't paid down a big enough chunk of your mortgage balance, you may not qualify for a loan due to inadequate equity levels.

Bankruptcy cancels your personal legal obligation to pay a debt, even a secured debt. This means the secured creditor can't sue you after a bankruptcy to collect the money you owe. But, and this is a big “but,” the creditor can still take back their collateral if you don't pay the debt.

There is good news for California homeowners who are considering filing for bankruptcy protection. A new state law raises the homestead exemption — the amount of home equity that can be shielded from creditors in a Chapter 7 or Chapter 13 — to a minimum of $300,000 and a maximum of $600,000.

It's possible to get a mortgage after bankruptcy is dismissed or discharged. However, there is usually a waiting period before you can apply for another mortgage. Are you looking for a new home, but you have a previous bankruptcy and strong credit? Rocket Mortgage can help you review your options.

To refinance your home during Chapter 13 bankruptcy, you must first obtain written permission from the bankruptcy trustee. More specifically, the lender will want proof that refinancing will not negatively impact your repayment plan.

You recently filed for bankruptcy

Unless you sign a reaffirmation agreement, your mortgage will likely fall off your credit report. If this happens to you, you can walk away from the loan, if necessary. Or, you can choose to remain in your home—as long as you stay current on the mortgage.

Unlike other debts, your mortgage payments will not be discharged after you complete your payment plan. In other words, you'll have to keep paying your mortgage in order to keep your home after you've completed your chapter 13 obligations.