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4 Refinance Options after Bankruptcy

4 Refinance Options after Bankruptcy

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Refinance options are available to many homeowners that were forced into bankruptcy during the recession that started in 2008.

You shouldn’t have to be stuck with a high interest rate if you had to file bankruptcy recently.

These refinance options may also be available if have lost a second or vacation home to foreclosure, short sale or a deed in lieu of foreclosure but have not yet met the waiting period requirements.

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As long as you continued to pay your mortgage on time for the past 12 months, in certain situations, you may have refinance options

Refinance Options

Unfortunately, these refinance options are not available to all homeowners under all circumstances.  There are qualifying requirements for all of these programs.

The most common trait among all of these options is that your current loan must be either a specific type of loan program.  These three loan types are also the most common loan programs on the market today.

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FHA, VA, and Conventional loans owned by either Fannie Mae or Freddie Mac are eligible for special refinance programs that do not require the underwriter to consider past financial hardship.

The other common trait among these programs is that all of these options only allow the reduction of your interest rate to reduce the interest rate.

These programs do not allow you to consolidate debt or take cash out from the refinance.  Rate and term refinance is the only option allowed.

FHA Streamline Refinance

An FHA streamline refinance is a reduced documentation, reduced cost refinance option that is available to anyone that currently has a FHA mortgage.

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Qualifying Requirements

  • You must have a FHA loan now
  • Your effective rate must be lowered by a minimum .50%**
  • Your payment must have been made on-time in past 12 months

** Effective rate includes actual interest rate plus monthly mortgage insurance premium (MIP) rate.  If the MIP increases or decreases in the future, this will directly affect your ability to be eligible for a streamline refinance.

Restrictions Not Allowed

  • Cash out is not allowed
  • Cannot combine multiple mortgages

Special Features

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  • No appraisal required
  • No income verification (employment only)
  • Upfront mortgage insurance premium will be partially refunded, and applied to your new loan if you closed your current FHA loan within 5 years.
  • No waiting period after bankruptcy, foreclosure, short sale or deed in lieu

VA Interest Rate Reduction Refinance Loan – IRRRL

If you currently have a VA loan, one of the benefits of loan program is the built in ability to do a low cost, minimal documentation refinance.

Qualifying Requirements

  • You must have a VA loan now
  • Your payment must have been made on-time in past 12 months

Restrictions Not Allowed

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  • Cash out is not allowed
  • Cannot combine multiple mortgages

Special Features

  • No appraisal required
  • No income verification (employment only)
  • VA guarantee fee reduced to .50%
  • No waiting period after bankruptcy, foreclosure, short sale or deed in lieu

HARP – Home Affordable Refinance Program

HARP is a special exception program that will allow a streamline refinance option for homeowners whose loan is currently owned by Fannie Mae or Freddie Mac.

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Set to expire in 2016, it was extended one more year, and is due to expire on September 30th, 2017

HARP may be an option if you can answer “yes” to all of the following questions:

  • Does Freddie Mac or Fannie Mae own your mortgage? Visit our Loan Look-up Tool to see if Freddie Mac owns your loan.
  • Was your mortgage originated on or before May 31, 2009?  The results from the loan look-up tool will include the note date on your mortgage.
  • Are you underwater, or do you have a current loan-to-value ratio greater than 80 percent?
  • Are you current on your mortgage payments?
  • Is your recent mortgage payment history good? That is, you don’t have any 30-day+ late payments in the past six months and no more than one late payment in the past 12 months?
  • Is your home your primary residence, second home, or investment property?

HARP refinance programs do not have a waiting period after bankruptcy, foreclosure, short sale or deed in lieu of foreclosure.

Portfolio Refinance

If you do not have a FHA, VA or eligible Fannie Mae or Freddie Mac conventional loan, there are still options for refinancing with no waiting period after a bankruptcy, foreclosure, short sale or deed in lieu.

Portfolio loans typically have out of the box solutions that meets the guidelines of a specific investor.  These loans do not follow FHA, VA or Fannie Mae guidelines, and not sold on the secondary market as a mortgage backed security.

Unlike the previous three options, a portfolio loan is not inexpensive or a streamlined process.  While these programs do offer many exceptions, you will pay for it through higher rates and fees.

If your rate is high now, or if you have an emergency and you need equity, these programs are great short term solutions that can be used until will be eligible for a better solution.

Getting Your Questions Answered

All lenders are not created equal.  Most of the readers that find this site because they’ve been researching solutions to challenges, and have been told 10 different things by 10 different loan officers.

We’ve created this resource to help you sift through the endless opinions and articles that may, or may not directly answer your question correctly.

There are several ways to ask questions, and get expert opinions on this website.

  • Submit a Question:  On the bottom of this page, you’ll see a prompt that allows you to ask questions.  These questions come directly to me and are answered very quickly.
  • Leave a Comment:  Below every article is the option to leave a comment or question.  We see these comments and questions in real-time and the always answered, usually pretty quickly.

In addition to researching your questions and providing you with expert advice, I can also introduce you to a lender friend that I know has experience with your specific situation and can help.

About Your Expert

Scott Schang

As a 19 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues, and making sense of complicated real estate and mortgage topics on this website since 2007

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