Bad Credit Mortgage Refinancing Options
There is no doubt that trying to refinance with bad credit history can be a difficult process and a very despairing one too. There will probably be more turn down replies and application declines than approvals. The last years have caused many families to drop into a dark financial slippery hole, which includes getting bad credit remarks on the FICO credit score. Having such negative remarks on the credit report makes the refinancing dream fade away.
When the interest rates have again hit the lowest point ever refinancing the mortgage and locking in 30 fixed rate seems to be a financial dream come true. But those hit by the financial Tsunami of 2009 may have several dark spots on their FICO report which would makes the dream of locking rates be less realistic for them.
Plan In Advance For Refinancing At 2015
The best advice would be to plan ahead, and start making the correct steps toward refinancing the mortgage in 2015. If your score is low (below 600) or you have several negative items on your report history, you need to take action NOW in order to be ready to be approved for mortgage refinancing at 2015.
There are several ways to clean a credit score, and they can all be done without outsourcing the process to expensive companies “mortgage rescue” which in many cases have been found to be scams. Because most of the people are not mortgage-brokers or financial advisers, it is recommended to get a credit repair guide and follow the 1-2-3 steps till the credit report is ‘cleaned’ from as much of the negative items still on it.
Once you have completed this part your score may be better and not only you may be approved , but you may be offered even better rates than you would have otherwise.
FHA Refinancing Programs For Low Credit Holders
The FHA (Federal Housing Administration) has several refinancing programs intended for those with bad credit history score. Having a poor credit will not automatically qualify you for these refinance programs, and a lot is dependent on how you score looks when it is checked by the lenders.
The FHA do not lend the money, (private lenders and banks do) the FHA backs you up, and insures the lenders get their funds back. This is done for a low insurance premium fee which is added to the interest rate.
The lenders offering refinancing solutions for FHA mortgage refinancing programs, seek diverse financial abilities rather than just looking at your FICO score. Many lenders would refinance your mortgage even if your score is lower than 600. For example QuickenLoans offers 15-20-25 or 30 years FHA mortgage plans for people with score as low as 580.
The FHA benefits are incomparable, and are worth the effort, especially if you are turned down by other financial institutes.
Some Negative Items Stay On Score For Years
There are some negative items which can stay on your FICO report for years and years. They will stick to you like a gum on your shoe and follow you in your future financial decisions. For some of these items there is not much you can do, but let time heal the wounds. Other items can be removed in slow process which can take month.
- Chapter 7′s bankruptcy stay on your credit report for 10 years from the date filed.
- Chapter 13′s bankruptcy stay on your credit files for 7 years.
- Judgments – Will stay on your score for up to 7 years.
- Tax Liens – Will keep showing on your score for 7 years since they were paid. Unpaid Tax Liens stay forever.
- 3rd Party Collections (credit cards) – Stay 7 years since creditor’s default date, and not since last payment.
Payments starts to pile up and begin their clock ticking when they turn ‘terminal delinquency’ this is 6 month after their last due date.
So if you plan on refinance with a bad credit history, and one or more of the items above shows on your credit history report, than you should aim at 2015 refinancing challenge. Get the FICO score fixed before you apply.
The amount of money you would save will be incomparable to what you earn.
So What Is The Next Step?
If you will do nothing.. don’t expect anything to happen. You must bump your credit score up! It will give you better leverage when facing the lenders, and better negotiation position when applying for any financial need.
Lets not forget you are probably paying $500-$1000 extra per year in higher interest rates, and credit payments.
If your score is below 700, you might want to clean it yourself – get this ‘Credit Repair University’ which will save you money and time.
Yes, you might need to invest a small sum to get a grip of things.. But if you think education is expensive.. try ignorance..
You are probably paying thousands of dollars per year in fees and interests to credit companies which could be going straight to your pocket. Don’t be cheap when it comes to financial education.. Ignorance costs more.