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Refinancing might be challenging after a bankruptcy

People who keep their home during bankruptcy often wonder when they'll be able to refinance their mortgage. Being able to do this can sometimes lower the monthly payments or get you a new interest rate. What some people don't realize is that they have to wait a certain period after the bankruptcy before they can refinance.

If you filed a Chapter 13 bankruptcy, you can refinance an FHA loan one year after you file the bankruptcy as long as you've made your payments to the court. If your loan is a VA loan, you must wait until the bankruptcy is discharged. There is a 2-year waiting period for refinancing a conventional loan.

If you filed a Chapter 7 bankruptcy, you may have to wait four years after it is discharged to refinance a conventional loan. This is reduced to two years if your loan is government-backed, which includes FHA and VA loans.

There is one exception to these waiting periods for refinancing after seeking bankruptcy protection. If you have filed bankruptcy more than once in a seven-year period, you will have to wait five years before you can refinance any loan.

While these waiting periods might seem long, you can make the most out of them by trying to boost your credit score while you wait. A better credit score can mean better loan terms. You can also use this waiting period to save money so that you have the closing costs you'll need to pay when you finance. In some cases, those can be rolled into the loan, but that is dependent upon the equity you have in the home.

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