After you have done what you can to maximize your credit score, you need to find the proper lender for your refinance. There are literally thousands of different lenders that will refinance your home. Some work with consumers with bad credit, some don't. Among those that will do bad credit refinances, some are better than others. First, get some information on current interest rates and rate movements. That way you'll know what to expect. Look at the APR, not just the interest rate. The mortgage's APR includes the total interest paid, including fees and other miscellaneous charges. By looking at the APR, you can determine weather or not a mortgage company is trying to hide extra fees and charges. The Federal Truth in Lending law requires mortgage companies to disclose the APR when they advertise a rate.
After you've got a good idea of what mortgage rates are, take a look at the mortgage firms in your area. Check up on them through the Better Business Bureau and your local chamber of commerce. If you want to use the refinance to improve your property, you should look at an FHA Title 1 home improvement loan. This sort of loan is not a true refinance, but a federally insured loan whose funds must be used to improve your property. It can be up to $25,000. Because it is federally insured, lenders are more likely to approve it, even if your credit score is a bit lower. Any lender that refinances and is approved by the federal government can typically get you one of these loans.
There are many companies that specialize in getting multiple rate quotes. In this way you can see rates from different mortgage companies all in one place. It's kind of a one stop shop of refinancing. There are some important things to look out for when getting a bad credit refinance. Some lenders think they have you with no other place to turn and will try to add in all sorts of clauses and fees. Here are some mortgage red flags to watch out for.
Prepayment penalties. These will preclude you from paying off your loan early when your financial picture gets better. It will also prevent you from refinancing to take advantage of better interest rates. Avoid a refinance with these penalties.
High pressure sales tactics. What are they hiding? If they are giving you pressure to sign right now, just walk away. They are probably hiding something. At the very least, have the mortgage contract examined by an attorney.
If the lender is more intent on the equity in your property than if you have the ability to repay the mortgage. If the lender isn't worried about you ability to actually repay the mortgage, that should tell you something. Either you have a very high income, or the mortgage company is salivating at the prospect of foreclosing on your home.
You can get a bad credit refinance on your mortgage. There are just some steps you should take first to make sure it is advantageous for you as possible. Your financial future will thank you.
Steve writes about a multitude of business and finance topics. He has been a principal in several businesses both online and bricks n’ mortar, including one that grossed over $1.5 million a year. See The Loan Consolidation and Bad Credit Refinance Guide about how to improve your credit, get out of debt and refinance your home.
