In a perfect world everyone would have a 720 credit score and a trouble free credit history. Unfortunately we live in reality and the truth is that many home owners have less then perfect credit scores. While bad credit can make refinancing a home loan difficult getting a mortgage with bad credit is actually easier then you think.
The first thing you must determine is how bad your credit actually is. Knowing your credit score will help determine your loan options and save you the headache of having to apply for a mortgage only to be turned down.
Bad Credit Refinance Options
If your score is 600 or higher then you more then likely will be able to secure a good low fixed rate FHA mortgage. Keep in mind that FHA requires your last 12 months mortgage payments to have been paid on time and your debt to income ratios need to be at or around 42%. FHA will refinance up to 97% of the value of your home so it works well for people with little to no equity in their primary residence.
If your credit score is under 600 and not below 500 you really have no other option but to use a sub prime lender. although they have gotten a lot of bad press lately sub prime loans can help people refinance their homes when other lenders turn them away. However never under any circumstance take a sub prime adjustable mortgage and always opt for the fixed rate. Sub prime loans allow you to refinance with mortgage lates, open collections and many other derogatory credit situations.
However if your credit score is under 500 you have some serious work to do because even sub prime lenders will not lend to borrowers with credit scores under 500. At this credit score level you have two options. You can either invest some time and money into credit repair to improve your scores to the level where you can secure sub prime financing. The other option is for you to use a hard money lender. Hard money lenders typically have very high interest rates and loan fees and should only be used as a last resort. They also only typically lend up to 70% of your homes value so they may not be able to help everyone based on those equity requirements.
By: Darin Sewell
Posts Tagged ‘Loan Options’
Options For Getting A Mortgage With Bad Credit
February 6th, 2010Posted in Article
Tags: Adjustable Mortgage Credit Score Debt To Income Ratios Derogatory Credit Fha Mortgage Getting A Mortgage Getting A Mortgage With Bad Credit Hard Money Lender Hard Money Lenders High Interest Rates Loan Options Many Home Owners Mortgage Lates Mortgage Payments Open Collections Refinancing A Home Refinancing A Home Loan Score Level Sub Prime Lenders Sub Prime Loans
Bad Credit Refinance Options
November 25th, 2009
Benefit
Refinance opportunities for people with challenging credit come in two main areas:
mortgage lendershard money lenders New Loan Options One of the most critical factors helping someone with bad credit is equity in the property.
If there is enough equity in a property then lenders will look much more favorably on a borrower with bad credit. For example. if the property is worth $300,000 and the mortgage is for $150,000 the borrower will have many lenders looking at their loan favorably.
Some lenders have not required a credit score if there is enough equity in a property (this is when a person owns more than 40% of the value of the property).
Hard Money Lenders
Hard money lenders offer loans for people who can’t be approved by regular lenders. People turn to hard money lenders because of the speed of their decisions and their flexibility. They can look beyond credit situations and look at the bigger picture. Hard money lenders usually also require a lot of equity.
Co-Borrowers
Some borrowers choose to include a new co-borrower on their application who has a higher credit rating. A borrower who is on a loan application but who does not live in the property is known as a “non-resident co borrower”. Some lenders allow this, and some lenders will not. It also depends on what type of loan the borrower is looking for.
Often times a lender will figure out a borrower’s debt burden after their credit card and other debt is paid off through a refinance.
By: Ben Afzal