Getting your finances back on track after filing for bankruptcy in California is possible, but it may take a while. Here is how you can refinance to qualify for a mortgage or home loan and also improve your financial situation.
Rebuild your credit score
It may be tough for you to refinance for a mortgage or home loan if you have bankruptcy on your credit report. Furthermore, continuing to apply for more loans could have a negative impact on your credit score. Therefore, improve your credit and have bankruptcy deleted from your report before you seek a home loan. Some tips for improving your credit score include:
• Disputing any errors on your credit report
• Maintaining a credit utilization ratio below 30%
• Not applying for more credit accounts
• Making timely payments for your loans and credit cards
Refinance after the waiting period is over
The waiting period for refinancing depends on the type of bankruptcy you filed for. For instance, the waiting period for Chapter 7 liquidation bankruptcy ranges from two to seven years based on the type of mortgage you had. If you took FHA and VA loans, you would wait two years; USDA loans have a waiting period of three years. For conventional loans, it’s four years, and for jumbo loans, it will take seven years.
Chapter 13 waiting periods are much shorter. The FHA, VA, and USDA loan waiting period is one year with 12 timely qualifying payments; conventional loans require two years, and jumbo loans require seven years.
Compare lenders and loan types
There are several lenders that specialize in refinancing loans for people who have gone through bankruptcy. Make sure to compare interest rates and terms from different lenders so that you can get the best deal possible.
Refinancing after bankruptcy requires a lot of patience. This is because bankruptcy will stay on your credit report for 7-10 years. If you are still within the waiting period or your credit report is affecting your ability to get a loan, you can consider other refinance alternatives like a mortgage modification or recasting.