I am serving up this Q&A in an effort to help consumers during their quest on finding a lender that will work with them, during their CH 13 bankruptcy, so they can purchase or refinance a home. If you have been denied a loan, or working with a loan officer that does not understand the nature of bankruptcy law, and FHA rules, you have come to the right place.
Being a Denver Mortgage Broker, we have access to not only more programs, but we do not have to deal with the conservative overlays of many local, retail banks. Just because you can purchase or refinance under bankruptcy law, does not mean that bank has an appetite for this kind of loan, mainly because it is more work intensive, and involves everyone to come together, in a successful collaboration, understanding FHA rules, and bankruptcy procedures.
I will modify this article over time, as every loan is different and unique in it’s own way, and will present it’s own challenges, however the below Q&A should serve as a strong foundation of a question you are needing to get an answer on, as we have helped many homeowners over the years, get to the closing table, over coming these challenges.
Question 1: Can I purchase a home while in bankruptcy?
YES! You can purchase home while in CH 13 bankruptcy and the following requirements will needed to be fulfilled. If you can satisfy the below requirements, you should be able to obtain financing.
- You have made at least 12 on time payments to the trustee for your CH 13 bankruptcy.
- You obtain permission from the trustee to purchase a home
Question 2: Can I refinance a home while in bankruptcy, and pull cash out of my home for repairs? Personal reasons?
YES! You can refinance your home while in CH 13 bankruptcy and the following requirements will need to be fulfilled. If you can satisfy the below requirements, you should be able to obtain financing.
- You have made at least 12 on time payments to the trustee for your CH 13 bankruptcy
- You obtain permission from the trustee to purchase a home
- You have made at least 24 on time payments on your mortgage
Question 3: My mortgage is not reporting because I did NOT Re-Affirm it during the bankruptcy. Can I still refinance?
YES! This is okay, and it is recommended you refinance because you are not getting proper credit for paying your mortgage. Even when your CH 13 bankruptcy is fully discharged, it will not report on your credit, in most instances. This artificially suppresses your credit score.
Question 4: How much of a down payment do I need, and what is my debt to income ratio max?
- You will need at least 3.5% down with a 580 credit score, and your max debt to income ratio will be 31/43% because we will get a Manual Approval for all loans in bankruptcy. It is only after your bankruptcy is fully discharged that we can go to a higher debt to income ratio, in some cases up to 54%, and higher for VA.
Question 4: How much cash can I obtain through a refinance during a CH 13 bankruptcy with approval?
- You can obtain up to 85% LTV, with a debt to income ratio of 31/43%
In most cases, we should be able to get you the financing you have been needing, however have been unsuccessful, due to a conservative lender, or an inexperienced lender. Allow us to work for you today by giving us a call for a full consultation, and complimentary credit report. We work with many local attorneys in Colorado, and have your best interest at hand. Call or email us anytime at 720-524-3215 and or email loans@brianquigley.com
If you are needing legal assistance, and have any questions about bankruptcy law, you can reach the law offices of Stephen Berken here.
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