Christian Home Refinance After Bankruptcy
People seeking a home refinance after bankruptcy may have a difficult time. Filing for bankruptcy damages credit scores and remains on an individuals credit report for up to ten years. Lenders are often reluctant to extend credit to individuals who have filed. Those that do tack on extra fees and charge higher interest rates to cover their risks. However, homeowners may feel pressure to refinance in order to avoid foreclosure or damaging credit even further. What do they do? There are options. Although laws do not prohibit individuals from applying for home refinance after bankruptcy, getting approved is almost impossible. But homeowners do have options.
Refinancing is simply a new mortgage that replaces an existing mortgage. Rates are packaged in two very different ways. Adjustable rate mortgages (ARMs) depend on the national index and fluctuate up and down frequently. Fixed rates are fixed at the current rate and do not fluctuate with the national index. Since mortgages are secured loans, using the house as collateral, interest rates tend to be lower than unsecured loans with no collateral. However, individuals wanting a home refinance after bankruptcy will face higher rates because of their increased risk factor. People who have filed under Chapter 13 bankruptcy have a better reputation and therefore more options than those who file under Chapter 7. This shows a willingness to work with creditors to repay debt, but getting approval takes time and patience to prove worth again to creditors. "But that on the good ground are they, which in an honest and good heart, having heard the word, keep it, and bring forth fruit with patience." (Luke 8:15)
Before rushing into a lender's office, homeowners need to determine why it's necessary to refinance and at what time to do so. Is the situation urgent? Or can refinancing wait until a more opportune time? Because interest rates fluctuate and are tied to an individual's credit situation, timing is crucial. There are many reasons to refinance at home. Some people wish to tap into their equity to free up cash to purchase a new car, pay for college or repay high interest debt. Others benefit by locking into a lower interest rate, shortening or lengthening repayment terms, or making monthly installments more manageable. Individuals applying for home refinance after bankruptcy usually want to save money, prevent foreclosure, and get back on track financially. The increased rates after bankruptcy proceedings make it difficult to do so. Refinancing is expensive with appraisal fees, closing costs, title insurance, and more. Often, it can cost more to refinance than not. But if timed right, refinancing can save homeowners thousands of dollars.
Unless an individual has already built up a considerable amount of equity in a home (at least 30% of the value), getting approved for home refinance after bankruptcy immediately is highly unlikely. Most people who file for bankruptcy don't have the equity in their home to repay outstanding debt, causing them to file. If individuals are committed to their repayment programs, continue to make mortgage payments in full and on time, and are able to save up for a decent down payment, credit scores begin to improve and interest rates drop after about two years. Any missed or late payment will deter lenders from approving another loan. As more time lapses, the better deal homeowners can get. Waiting to get that lower rate can shorten the repayment term, reduce monthly payments, and release extra cash flow every month. Until then, homeowners can expect minimum interest of 3% above the current rate.
Before applying for refinancing, homeowners must know where they stand. By visiting online websites, individuals applying for home refinance after bankruptcy can learn what type of rate is currently being offered to people like them - those with poor credit or whom had recently filed bankruptcy. That information is vital and can help them identity when an unethical lender is trying to charge too much. It can also determine if the overall cost is going to be worth the effort of refinancing. If a refinancing rate will drive monthly payments and overall payout up, sticking with the original mortgage may be the best choice. Homeowners should also check with their current lender first. If payments have been made on time, then he or she may be willing to offer a lower rate.
When the time comes to refinance, get quotes from at least three different lenders before applying. Compare interest rates and fees. Make sure there are no penalties for pre-payments or pay-off on the current mortgage. These can cost up to six months of payments or interest. Consider applying with lenders who specialize in refinancing to people who have bad credit. Some lenders prefer to wait until a borrower has completely repaid the bankruptcy before approving home refinance after bankruptcy. The Federal Housing Association (FHA) allows for refinancing after one year, and are very popular among homeowners. But beware loan scams which are on the rise. They often target people with bad credit who are especially vulnerable.
The best way to home refinance after bankruptcy is to start rebuilding credit immediately after the filing. Make all payments on time, especially mortgage payments. Apply for a credit card or use an existing one that is still open. If a lender will not approve credit for a standard card, apply for a secured credit card based on some type of collateral. Use the credit, but only sparingly. Pay off the balance at the end of each month to avoid interest charges and late fees. Doing will increase personal credit scores. Finally, establish savings and checking accounts. The more cash assets a person has, the greater their chance of a loan approval. Getting back on track financially after bankruptcy is not easy, but it is possible. Refinancing a home can help, but only if done in at the right time. Consider all the options and wait until that time comes if possible.
Christian Home Mortgage Refinancing LenderA reputable home mortgage refinancing lender can help many homeowners find needed economic solutions in tight times. To refinance a real estate loan means that an entirely new loan is made available to the borrower. This loan will pay off the original mortgage and secure new and hopefully improved terms for homeowners. If a borrower had previously agreed to a variable rate financing plan, but now wishes to attain a more reasonable fixed interest rate, a refinance might be the answer. This move could result in significantly lower monthly payments for the homeowner. Of course, the down side is that the loan may end up taking many more years to pay off than was the case with the original agreement. Each borrower must decide for themselves whether or not the improved terms are worth the trouble and expense of negotiating a new loan. Some of the benefits of working with a home mortgage refinancing lender could include reduced payments, reduced interest rates, and in some cases, a shortened pay back period. Cash out refinancing plans can enable a homeowner to borrow more than what is owed on the mortgage. This extra cash is available if the borrower has accumulated an acceptable amount of equity in the property. A homeowner might use this cash for repairs or restoration of the property, to pay off other bills, to pay for a child's education, or any number of other needs.
A professional home mortgage refinancing lender can advise a client on the type of loan that would best suit the homeowner's needs. One of the biggest factors in determining the cost of a refinance plan would be the APR, or annual percentage rate. This is, of courses, not the only expense that is associated with these loans. There may be many additional fees and charges that a hopeful borrower will need to understand. The banking professional assigned to the case should be able to provide clear and complete answers to any questions that the homeowner may have. The APR and the overall interest rate of the loan will not be the same. The APR is a calculation that is based on the amount of money being financed and the monthly payment on the loan. A fluctuating interest rate can turn into an expensive proposition for a borrower facing a thirty year mortgage. Interest rates can change rapidly. A sudden rise in interest rates can often cause a steep increase in monthly house payments. Plans that include a fixed rate of income can be more cost effective over the long hall. For this reason, many homeowners will seek out the help of a home mortgage refinancing lender. The ability to lock into interests rates when they are at a low point can be a smart financial move.
When choosing a home mortgage refinancing lender, a borrower should be wary of organizations that offer terms that seem too good to be true. Extremely low interest rates or the promise of unusually low payments are generally warning signs that this lender may not have the borrower's best interests at heart. Bait and switch is an old practice that involves luring clients in through impressive promises, and then switching the terms of the offer once the client is interested. The local Better Business Bureau may be able to advise an individual on the reputation of a particular lender. Comparison shopping among lending institutions is always a good idea. Financing providers must supply a Truth in Lending statement and will generally offer the client a good faith estimate of the cost of the potential loan. One of the things that a home mortgage refinancing lender will look at is a client's DTI, or debt to income ratio. By comparing a borrower's debt with the amount of income that is earned, the size of an affordable monthly payment can be determined. In most cases, a proposed mortgage payment will include the principal, the interest, and the escrow. The principle is the actual amount of money that is being borrowed. The interest is a payment that is made to the lending institution in exchange for allowing the money to be borrowed. The escrow represents money that will go into a separate account to pay for insurance and taxes.
Some homeowners choose to work with home mortgage refinancing lenders in the hope of gaining a new mortgage that will allow them to shorten the length of their loan. This can be done by taking out a fifteen or twenty year mortgage to replace a thirty year loan. While the payment on these shorter terms loans will generally be higher, the interest rates are usually somewhat lower. Wisdom in any kind of financial dealing is a very valuable commodity. The Bible talks about the superiority of God's wisdom over man's. "For the wisdom of this world is foolishness with God. For it is written, He taketh the wise in their own craftiness." (1 Corinthians 3:19)
Another lending option that could be provided by a Christian home mortgage refinancing lender might include cash out refinancing. With a cash out loan, a borrower can receive money based on a property's equity by borrowing more than what was owed on the property before the new loan. Many homeowners pay private mortgage insurance every month. This is a policy that must be paid by homeowners who have less than twenty percent equity. Creative refinancing can sometimes provide a way for borrowers to eliminate this insurance payment.