Refinancing your mortgage with less than decent credit is easier than you think. Competition for your mortgage is fierce and despite the meltdown of the sub-prime mortgage industry opportunities still exist for homeowners with poor credit ratings. Here are several tips to help you qualify when refinancing your mortgage with bad credit.
Having bad credit will not prevent you from mortgage refinancing. There is still an entire industry devoted to bad credit mortgage refinancing despite the negative publicity and lender bankruptcies you may have seen in the news. While it’s true the qualification guidelines have been tightened for bad credit refinancing, with a little bit of legwork you can still refinance your mortgage with a loan similar to that a homeowner with good credit receives.
Refinance Mortgage Bad Credit
The first thing you should do before refinancing your mortgage is to check your credit history for errors. Congress passed a law requiring credit agencies to provide you one free copy of your credit report each year. There are three credit agencies that maintain credit records on you and they are Equifax, Experian, and Trans Union. You can print out your credit history by visiting the website annualcreditreport.com; make sure you print your history from each agency as these companies maintain separate records for you.
If you find errors on your credit history you’ll need to dispute the mistake with whatever credit agency maintains that record. Each credit agency has a procedure for dispute resolutions and you can find instructions on the company’s website. Once you’re certain your credit reports are accurate, what can you do to improve your credit score before refinancing your mortgage?
Once your credit reports are accurate you can improve your credit score by removing any negative information like bad debt. Most creditors are willing to settle just to get the debt paid so you could save yourself money by negotiating a settlement. You can also improve your credit score by paying all of your bills on time; 35% of your credit score is based on your history of on-time payments.
How Bad Credit Affects Mortgage Refinancing
Having bad credit will not prevent you from taking out a new loan; you’ll just have to pay more with a higher mortgage rate. Depending on the severity of your credit difficulties you may need to enlist the help of a mortgage broker that specializes in bad credit mortgage loans to get qualified.
Whenever dealing with a mortgage broker you have to be careful that the interest rate you receive is the actual rate you were approved. Mortgage brokers routinely markup mortgage rates to boost their commission at your expense. This markup is completely unnecessary because you’re already paying an origination fee for the broker’s help. The markup your broker adds for his or her commission is called Yield Spread Premium and avoiding it needs to be your number one priority for your bad credit refinance mortgage.
You can learn more about your bad credit mortgage refinancing options, including strategies for improving your credit and qualifying for a wholesale mortgage rate by registering for my free mortgage refinancing toolkit.