Homeowners who have a bad credit rating typically got to that point due to unexpected expenses, emergencies, time off of work, hospital bills, or other big events. A lot of homeowners with financial problems will look into refinancing their mortgage to save money, pay off other debts, or get some cash back from the home's equity. Getting a mortgage refinance with bad credit is the same process as getting one with great credit, however, there are some things which you should be aware of prior to refinancing.
When a homeowner refinances with a bad credit score, interest rates are generally going to be higher than for a homeowner with good credit. The rate will be dependent on a number of factors including, the amount owed, debt to income ratio, and your mortgage payment history. Typically, attempting to refinance more than 80% of the value of your home will result in a dramatic increase in interest rates. Also, remember that a loan which you have verified your income and debts will usually have better interest rates than a home loan that is not verified. A homeowner with bad credit would benefit from having everything verified, and getting lower mortgage rates from that.
Refinancing a mortgage with bad credit also usually involves more closing costs and fees than a typical refinance will. Fees for underwriting mortgages with a sub prime mortgage lender are typically higher than a traditional bank, and those fees get passed on down to you. Also, there may be loan origination fees, private mortgage insurance, and broker costs. This loan origination fee is the cost of having a broker research and finds your the best loan possible.
If you're a homeowner who is in a need to refinance and you have bad credit, do not worry. Compare a variety of mortgage lenders and banks and scrutinise their offers and see which is best for you. However, it is almost inevitable that you will be paying slightly higher interest rates, closing costs, and other fees with less than desirable credit. There is help available for all homeowners, take advantage of it and improve your financial situation.
To know more tips about mortgage refinancing, consult Lendium today!