How to Refinance a Home with Bad Credit
Credit can be a tricky thing to tackle. If you’ve lost your job or become overwhelmed with medical bills, you may not be able to control your credit health. There are many things that you can do to help your score, but it will still take time to rebound. Unfortunately, life still goes on. You may find that you still need to use your credit to purchase things, even though your credit is a bit iffy. What happens when you need to refinance your home?
There are many reasons to refinance your home. You may need to use the equity of your home to pay off those medical bills that caused your credit to plummet. You could use that money to pay college tuition. Many homeowners refinance when their credit has improved to get a better interest rate. Since your credit isn’t the best, you may not be able to lower your interest rate, but you will still be able to refinance. Let’s take a look at how to refinance a home with bad credit.
First, do anything you can to improve your credit before you start the refinance process. The better your score the better your interest rate. Your interest rate is very important because it affects the total amount you will pay for your home. You may not notice a huge difference in the monthly payment, but the overall price will be majorly impacted.
Next, talk to several mortgage lenders. You should shop around to find the lowest interest rate. Remember, the interest rate is extremely important. You may need a cosigner to help you get a better rate or approval.
Do your homework. There are programs that will help you refinance your home like, HARP and FHA Streamline Refinance. Many programs don’t check your credit. Some don’t even verify income. Many of these programs want to know that you’ve been paying your loan on time, however. They may want to see that your have been current for six months and that you haven’t been late more than once over the last year. They may not approve your refi if you have filed bankruptcy recently or had a foreclosure. Many want to know your debt to income ratio. These lenders want to know that you will be able to repay the loan.
Having poor credit may not be complete your fault, but you will still suffer because of it. Fortunately, you're not alone. There are millions of people with your situation. This is why there are programs out there that will help you even if you have bad credit. The best way to get an approval is to work on your credit. Check your report for errors and pay your bills on time. Be sure to talk with several lenders before making your choice.