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Rising Interest Rates And Refinancing After A Foreclosure

Oct. 24, 2018

News & Advice From The Leading Carson Bankruptcy Attorney

If you’ve been reading the news, it’s no secret that home loan rates have been rising throughout 2018. If you’re one of the more than 700,000 Americans who filed for bankruptcy last year, often involving a foreclosure as well, then you may be wondering if you’ll ever be able to take advantage of home loan rates that are still historically low.

The answer is not a simple one, though. A common belief is that you’ll need to wait seven years to refinance after a foreclosure. But there are many other factors involved. As a general rule, Fannie Mae and Freddie Mac still have a seven-year waiting period after foreclosures. Now come the exceptions. If a borrower can prove extenuating circumstances, such as a prolonged job loss or big medical expenses, the waiting period has been shortened to three years.

If you’ve experienced a different negative event, such as a bankruptcy or short sale, the waiting period has been shortened to two years – again, however, that’s with extenuating circumstances. The general rule without extenuating circumstances is four years.

Now let’s talk about FHA loans. This agency has loan programs that are even more forgiving. For example, if borrowers participate in the FHA’s Back To Work program, the agency’s three-year program can be shortened to one year. But there are caveats: can you document a significant loss of household income? Have your finances fully recovered from your negative event? Have you completed housing counseling?

If this all sounds a bit confusing and less than crystal clear, welcome to the world of mortgage financing. The best advice I can give if you have any doubt about your ability to refinance following a bankruptcy or foreclosure is simply to call me. It’s just as important to have an experienced bankruptcy attorney in your court for refinancing as it is to have one for filing an initial bankruptcy or foreclosure. But don’t wait — interest rates to do appear to be headed anywhere but up.