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June 21, 2019
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July 5, 2019

How to Refinance after a Major Credit Event

There are three events on a borrower’s credit report that are carefully looked at; foreclosures, short sales, and bankruptcies. Lenders will pay attention to these events because they want to minimize their risk in lending money out.

Lenders will look for patterns that would indicate risk, and borrowers with these type of events on their report, are at a higher risk of something similar happening again.

However, buyers with these events present on their credit report are still eligible for future home refinances. They simply need to understand the lender’s guidelines and follow them in order to increase their chances for approval. There are three important aspects to this process that are key:

  1. Honestly
  2. Honesty is extremely important when talking to your lender about a loan. Any information that you can provide them about what you went through will help them understand what happened in more details. Keep in mind, having these events on your credit report does not mean that you can’t get approved, therefore, being upfront with your lender on how the situation was handled can be extremely beneficial.

  3. Waiting Periods
  4. Conventional loan programs such as Fannie Mae/Freddie Mac and FHA have more strict guidelines for approval following a major credit event.

    Foreclosures usually have the longest waiting period before a borrower can purchase a home. In general, you’ll need to wait seven years, however, depending on your situation and extenuating circumstances surrounding the foreclosure, the waiting period could be as low as 3 years. Your situation must be extensively documented for the lender in order to determine whether this situation was truly beyond your control.

    Short sales’ waiting period can depend on how much you can put down on a house, but it is typically four years for non-extenuating circumstances and two years for extenuating circumstance situations.

    Regarding bankruptcies, there are two types; chapter 7 and chapter 13. If you decide to apply for a conventional loan, the waiting period is typically 2 years. However, if you decide to apply for either a hard money loan or a non-conventional loan, you could apply for a refinance one day after the discharge of your bankruptcy.

    OptionWide.com offers various programs in which you can qualify immediately after the discharge of your bankruptcy.

  5. Credit Score

For any lending programs, keep in mind that your credit score plays a significant part in getting approved.

Have you improved your credit since your credit event took place? Have you been able to maintain good standing since then?

Borrowers looking to refinance who make a continuous effort to stay on top of their payments and maintain a good credit score are more likely to make a good impression on lenders and get approved.

Our team at OptionWide.com understands that life happens and that not all major credit events are in your control. Whether it’d be a foreclosure, short sale, or bankruptcy, we believe that everyone deserves a second chance. We have flexible programs which are specifically designed to help those who have gone through a hard time and are ready to get back on their feet.

To Learn More, Give Us a Call Today at (877) 342-0181 or Apply Online