Bad Credit Refinancing
Almost every type of loan for a
mortgage refinance will require quite a bit of documentation and asset verification, but this is even truer for
a bad credit mortgage. In fact, it is true that many of the
programs that used to cater to consumers with poor credit are not available any more. The parameters of bad credit have also changed. Five years ago, anyone with a credit score above 500 could easily find a loan
program. Nowadays, it can be difficult to qualify for a loan if you
don't have a credit score above 620. Although it is more difficult
than it used to be, you can still find ways to refinance your home with bad credit.
There are many factors
to consider when considering mortgage refinancing, and one of the first things you need to
look at is the available loan programs. You want to be sure that
refinancing your home makes good financial sense. For instance, if
you are refinancing from an Adjustable Rate Mortgage (ARM) to a fixed rate mortgage, that makes sense if your
new rate is lower than the expected ARM payment when it adjusts.
Another factor is your
debt to income ratio. If your overall debt is high when compared to
your income, you may not qualify for a fixed rate mortgage refinance. However, you may qualify for a cash-out refinance if the cash you get from the
loan is used to pay down debts with a high rate of interest so that you are effectively lowering your debt to
Refinancing may not make
sense if the closing costs are very high and you are only planning to be in your house for a short
time. If you plan to move within a year or two, paying the closing
costs on a mortgage refinance doesn't make much sense. However, if
you plan on staying in the home for many years and will be able to recover the closing costs because of the
lower interest rate, it can be well worth the effort of refinancing.
Your current lender may
be willing to offer a streamlined refinance where the closing costs are minimal and there is little
paperwork. Paying the closing costs rather than rolling them into
the loan usually means you won't need an appraisal.
Even if you have bad
credit, you can find a mortgage refinance program that can work for you. Just be sure to evaluate if it will really help your situation, and if it
will, don't wait until the interest rates go up again.