Do you want a lower monthly payment? Perhaps you prefer to switch your adjustable rate mortgage to a fixed rate. If this sounds familiar, refinancing your home may serve to your advantage. In the past five years, mortgage interest rates have dropped dramatically. Thus, many people who purchased homes when rates were high refinanced their homes. Refinance involves creating a new home mortgage, and homeowners must re-apply for a home loan. With this said, refinancing sounds great for individuals with good credit. However, refinance loans for bad credit are widely available.
Refinance Home Loans
Ordinarily, a person with bad credit would have a difficult time obtaining a loan. This is because a persons credit worthiness is based on information included in their credit report. Individuals with a history of paying bills late or refusing to pay their creditors are considered high risk candidates, thus lenders are unwilling to loan money to them. However, refinance loans are different. When a homeowner refinances, their house serves as the collateral. Therefore, if a person defaults on the loan, the lender may take possession of their home.
Knowing When to Refinance
The key to refinancing a home involves knowing when to refinance. Commercials and radio advertise low interest rates. Thus, many homeowners choose to take advantage of low rates and lower their monthly payments. Unfortunately, the cost of refinancing a home may sometimes outweigh the savings. Because a refinance creates a new mortgage, homeowners are responsible for fees such as closing costs, title search fees, settlement fees, prepayment penalty fees, etc. Moreover, some mistakenly refinance before a home has time to build sufficient equity. Another reason for refinancing a home includes receiving a shorter term, which may also boost a home’s equity
One benefit to refinancing a home with poor credit is that homeowners may receive a lump sum at closing. This money may be used to improve credit – pay off credit cards, consumer debt, etc. For this to happen, a property must have ample equity. Some mortgage professionals encourage homeowners to keep an original mortgage for at least two years before refinancing. This allows the property value and equity to grow.
By: Carrie Reeder
Posts Tagged ‘Loans With Bad Credit’
Refinance Home Loans with Bad Credit – Knowing When to Refinance
February 15th, 2010Georgia Refinance Loans With Bad Credit in Atlanta, Savannah, Augusta, Athens, Columbus, Macon, etc
December 23rd, 2009
Homes in Atlanta, Savannah, Athens and surrounding areas have appreciated to allow homeowners to take cash out of their homes, via home equity loans or home equity line of credit loans, to finance home improvement projects, credit card debt consolidation, education, etc.
If you live in Georgia and you need a mortgage refinance loan but you are worried about bad credit – know that it is possible to get a HELOC or Home Equity Loan, even with a low credit score be it 450, 500 or 550.
What is your FICO credit score?
Your FICO (Fair Isaac Corporation) score is number between 300 and 850, that indicates your financial health. A good FICO score is a score above 670, while a poor FICO score is a score below 620. Different lenders vary of what they consider a “fair” credit score versus a “poor credit score” – this
can be a gray line.
Having a good credit score allows you to get credit on competitive terms – good interest rates, exciting new loan products, credit cards, etc.
If you have a low credit score below 600, you will need to find a subprime refinance lender, who works with people with bad credit, whether it is due to poor debt management or a history of Chapter 7 or Chapter 13 bankruptcy.
Not all subprime lenders are created equal. The best lender is a lender, who is willing to look at your specific situation and find you the best loan product. Even though, you may have a low credit score, you may also have good equity in your home. Some lenders even offer up to 125% LTV (Loan-to-value) loans, if you qualify.
By: Alexandra French