Refi or Home Equity Loan after Ch13 BK

[Eppie1983]

Hey Everybody

I am looking to add to the value of my home by taking out 130-150k for an addition on my house. I owe just under 200 and the house is worth 380-400k. My FICO 5,4,2 are all around 720. Do I have any shot at getting approved right after Ch 13 discharge or is it a fantasy? Ive paid back 80k over a 5 year BK13 and have no debt.  What do you guys think?

[Eppie1983]

Hey everybody

Looking for stories or guidance on getting cash out to do home addition. My Ch13 will be discharged in the next month or 2. My scores are around 750 and I have no debt other than the house. Wondering how the banks will be. I have 185k in equity. Any help is appreciated. I am also a veteran and want to take 130-150k out.

[sumthin28]

You mean after the discharge? Absolutely but you can only get FHA. Conventional you would have to wait 2 years from discharge, which if you did the full 5 years like me than by that point the bk will fall off your reports. This sucks because you are going to be forced to eat pmi even with big equity, but it's that or wait 2 more years. I am in almost the exact same position right now, My chapter 13 discharges in 45 days and I am going to do a cash out refi of about 150k to renovate my house. I

The thing I don't know yet is if we can start the loan process before the discharge and have it close shortly after or if I have to wait until the discharge is on the credit report to apply?

[Eppie1983]

Congrats brother on making it to the end. I make my last payment this coming week and hopefully only a month or two to discharge. 

I dont know if you are too, but I also have VA as a possibility. Talking with Quicken Loans you just have to have an order of discharge to apply for that. My questions was more about even if I can apply, would they approve it. Either way refinance may not even be the best option. I am at 3.125 on my house so it would probably be smarter to get a home equity loan so at least I am only paying the higher interest rate on the 150k and not the whole 350k. The way the market is and interest rates, its better for me to add to my current home instead of selling high and having to buy high. I havent researched much but there's also private companies that do loans too. My plan I think is to sit down with my local bank and discuss options and have my FICO scores with me. 2,4,and 5 for me are around 720. As far as the question about when to start the process, I would just ask your bankruptcy attorney. For my 5 year chapter 13, he never even mentioned that I could get credit to start rebuild. Not sure if he just didnt want to have to ask the court or he thought it was a better idea. But I havent acquired a card or any loan in 5 years. Crazy. Let me know if you want to talk offline about your renovations. I think about mine constantly as the addition has been a dream of mine for 12 years. Thanks brother for responding and have a good Sunday.

[ShanetheMortgageMan]

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@Eppie1983 wrote:

Hey Everybody

I am looking to add to the value of my home by taking out 130-150k for an addition on my house. I owe just under 200 and the house is worth 380-400k. My FICO 5,4,2 are all around 720. Do I have any shot at getting approved right after Ch 13 discharge or is it a fantasy? Ive paid back 80k over a 5 year BK13 and have no debt.  What do you guys think?

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With the recent Ch 13 BK discharge it'll be tough to qualify for a home equity loan/line of credit, as usually you'll need to be at least 4 years discharged from any mortgage.  They are tougher on seasoning requirements due to being in 2nd position on title, so they don't have as much equity to protect themselves in the event of default as if they were in 1st position on title.  Some banks may be willing to bend their rules a little since home equity loans are usually just kept under the originated banks portfolio (vs. selling the loan + having to make it conform to another lender's guidelines to want to do the loan) so as you get more distanced away from your BK discharge it could be worth asking around. 

Between FHA & VA financing VA is almost always the better option, no monthly mortgage insurance but keep in mind there is an increased VA funding fee unless you are exempt.  With either FHA or VA your Ch 13 BK doesn't have to be discharged prior to application, that could just be a Quicken requirement.

[pizzadude]

Hi @Eppie1983 , I moved this to Mortgage Loans for better visibility.

What is your current interest rate on your morgage ?   Rates are going up now so a refi may not make sense if your rate jumps significantly. 

[Eppie1983]

@pizzadude you are right I am at 3.125 what are my best shots as far as banks and lenders fresh off chapter 13?

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@pizzadude wrote:

Hi @Eppie1983 , I moved this to Mortgage Loans for better visibility.

What is your current interest rate on your morgage ?   Rates are going up now so a refi may not make sense if your rate jumps significantly. 

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[pizzadude]

Here's a recent thread , it sounds like it's possible after BK13 discharge but the timeframe varies.

[ShanetheMortgageMan]

You created a similar question/post the day before you created the subject one, your previous question/post was at at https://ficoforums.myfico.com/t5/Mortgage-Loans/Refi-or-Home-Equity-Loan-after-Ch13-BK/td-p/6530114

[pizzadude]

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@ShanetheMortgageMan wrote:

You created a similar question/post the day before you created the subject one, your previous question/post was at at https://ficoforums.myfico.com/t5/Mortgage-Loans/Refi-or-Home-Equity-Loan-after-Ch13-BK/td-p/6530114

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Thanks @ShanetheMortgageMan !  I've merged these two threads together.