Re-Financing with Bad Credit

These days many people can get into a bad credit situation if they do not keep track of their income and expenditure. Many young adults suddenly find that they are being offered credit cards by various companies. Those who are sensible will find a credit card that suits their needs, sign up, keep track of their purchases, pay off their credit card bills in full each month, and ignore offers from other companies.

Several years ago, it would have been extremely hard for those with bad credit to get a mortgage loan in the first place. However, now there are so many loan alternatives available and so many ways for loaners to protect themselves that those with bad credit can’t only get a proper mortgage but may also get appealing re-financing alternatives as well.

Those with poor credit should carefully consider whether or not re-financing is ideal for them at the present time but the process isn’t much different for them as it’s for those with good credit. Those with bad credit who prefer to learn more about re-financing should consult a mortgage advisor who specializes in mortgages for those with bad credit. Additionally the householder should carefully evaluate their credit score and whether or not it’s improved. Finally the householder should evaluate their alternatives carefully to ensure they’re making the best possible decision.

Consult a Mortgage Advisor

Consulting with a mortgage advisor is recommended for those with poor credit. These householders possibly knowledgeable about the process of re-financing but their situation warrants consulting with an industry expert. This is important as a mortgage advisor who specializes in getting mortgages and re-financing for those with bad credit will likely be very knowledgeable about the types of alternatives available to the householders.

When consulting with the mortgage advisor, the householders should be completely honest about their financial situation and should provide the expert with all of the information he needs to assist them in getting an ideal re-financing agreement. Being completely candid will be very helpful in enabling the mortgage advisor to assist the householder in the best way possible.

Consider Whether or Not Your Credit has Improved

Householders with bad credit should carefully consider whether or not their credit has improved since the original mortgage was secured. Householders who have documented proof of past credit scores may compare these scores to current values. Each citizen is entitled to one free credit report per year from each of the major credit reporting agencies. Householders may get these reports for use in making comparisons to the previous credit scores. Imperfections on the credit report such as failures, delinquent or missed payments and other transgressions don’t remain on the credit report.

These blemishes are much erased from the credit report after a certain time period. The amount of time the transgression remains on the report is proportional to the severity of the offense. E.g. a failure will remain on the credit report for significantly longer than a late payment. In examining the credit report, householders should consider the overall credit score but should also note whether or not previous offenses are being erased from the credit report in a timely fashion.

Evaluate Re-Financing Options Carefully

Once a householder has tentatively made a decision to re-finance the mortgage, it’s time to begin considering the many alternatives that are available to the householder during the process of re-financing. Most householders mistakenly believe one factor of the re-financing process they’ve no control over is the rate of interest. While this rate is largely dependent on the householders credit score, even those with poor credit have the power to lower their rate of interest by buying point. A point is typically equally to 1% of the total loan amount and may translate to a ¼ of a percentage point on the rate of interest. When deciding whether or not to buy points, the householder should carefully consider the amount of time it would take the householder to recoup the price of buying the points. This will aid to determine whether or not it’s worthwhile to buy one or more points when re-financing.

Householders will also have alternatives in terms of the type of loan they select when re-financing. Common alternatives include fixed rate mortgages, adjustable rate mortgages (ARMs) and hybrid mortgages. The interest rate remains constant with a fixed rate mortgage, adjusts with an ARM and is fixed for a period of time and adjustable for the remainder of the loan period with a hybrid loan.