Bad Credit Home Refinancing

Bad credit home refinancing provides a way for those with poor financial history to convert to a fixed rate mortgage, remodel, pay off high interest debts, and save on the monthly payment amount. Families who find themselves in a position where they can not refinance may want to check out bad credit home refinancing with lenders online. Some homeowners may even find themselves in a position where they face foreclosure because their monthly payment amount is just too difficult to make. Homeowners may also be suffering with low credit scores because trying to make a large mortgage payment has caused them to get behind on the rest of their bills. Late payments and maxing out charge cards can do a great deal of damage to one's financial history. The best way to go about finding a lender who offers competitive rates is to do a search online and compare options between financial institutions.

One of the types of loans available for homeowners with questionable financial history is through Federal Housing Administration (FHA). Bad credit home refinancing through FHA can help a person to avoid foreclosure. An FHA option means that 97% of the mortgage is covered so the remaining 3% is for the down payment. Congress has raised the limits on FHA options for several months and concessions can be made for the down payment which will mean down payment assistance for those who need it. A fixed rate or an adjustable rate can be chosen. One option allows the homeowner to have a reduction in interest for the first year of the mortgage but this is usually done with an adjustable rate mortgage.

Lenders online advertise that borrower's with past financial problems can qualify for bad credit home refinancing. Bankruptcy, being late on credit card payments and even late payments on a mortgage will not disqualify a potential borrower from being approved. A person can do credit repair before applying for a loan to help raise scores. This can be easily done by disputing any derogatory or incorrect information on financial history kept by the three major credit bureaus. Disputes must be answered within 30 days or the item in question must be removed from the report. When a negative item is removed or corrected then this helps to raise scores.

Homeowner's with bad financial history can qualify for refinancing because some lenders do not evaluate a person based solely on past financial history. Mortgage companies that offer bad credit home refinancing takes the borrower's ability to repay into consideration by looking at income and other factors. The borrower must be able to prove income by supplying paycheck stubs or profit and loss statements. A lender will want to figure debt to income ratios when the borrower has a great deal of debt. A borrower's past payment history on an existing mortgage may be taken into consideration. If the borrower has made several years of payments on time a lender will be more likely to give an approval even if their current situation has put him or her behind. "The rich rule over the poor, and the borrower is servant to the lender" (Proverbs 22:7).

Cash out refinance provides an option for the borrower who is trying to pay off high interest credit card debt. Bad credit home refinancing can allow a homeowner to get cash from the equity in the home. The difference between the value of a home and what is owed leaves the amount of the equity. Some homeowners may want to convert from an adjustable mortgage to a fixed rate mortgage so they do not have to worry about the monthly payment amount increasing over time. In addition, refinancing with a lower interest rate could save the homeowner a great deal of money and allow him or her to pay off the mortgage years sooner. A cheaper payment along with paying off existing high interest debts could mean a lot to borrowers who have been barely able to pay their bills each month and in some cases have fallen behind.

Some mortgage companies view borrower's with poor financial history as sub-prime candidates. This could mean paying a significantly higher interest rate on bad credit home refinancing options. The best thing to do is to check out several mortgage companies before making a decision. Some lenders are a little less strict about interest rates and approvals for those with questionable or low credit scores. Sub-prime candidates are in a category where lenders that will approve for financing may look closely at debt to income ratios and loan to value ratios. Borrowers who have a large amount of equity in the home will be seen by lenders as a lower risk because the actual loan amount will be less. Also, if a homeowner has free cash each month because his or her income exceeds debts then they have a better chance of being approved for a refinance.

An interest only mortgage refinance allows the borrower to pay only interest for the first couple of years of a loan. Bad credit home refinancing usually allows the borrower to choose this option if there is a good chance that income will increase and debts will decrease in the future. This allows the homeowner to make lower payments because he or she is paying interest only, no principal goes to the loan amount. This option can work for those who believe their financial situation is going to get better soon. After the period of interest only ends then the borrower will still owe the same amount on the house as he or she did at the time of the loan. After this time if the value of the home increases above the loan amount then the homeowner will still have built some equity in the home.



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