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Important Facts You Should Know When You Refinance a Bad Credit Home Loan

If you are currently making payments on a home loan that was executed under the onus of bad credit scores; it probably has pretty high interest rates and unwieldy monthly payments. You may want to consider getting a bad credit home loan refinance.

Hard Times Make Traditional Lenders Shy

Because of these economically unstable times, many people have taken hits on their credit scores. The instability caused by the housing loan debacle of the last decade made lenders raise their standards, not only for home loans but also just about any loan. So it is somewhat difficult to wrest a home loan refinance from them if you have a smudged financial history. However, if you have been a client at a traditional lender and have a good history with them you probably should approach them. They will be able to offer the lowest rates available.

Private Lenders Step In

With traditional lenders not lending to bad credit borrowers and with so many bad credit borrowers in need of refinancing, private companies have recognized a growing (and profitable) market and have stepped in to offer bad credit home loan refinancing.

Gather Your Documents

Before you go shopping for a bad credit home loan refinance, you should have your documentation. You will need two forms of government issued identification, proof of job stability and salary, access to an active bank account (usually checking with direct deposit), proof of residency and other home buyer documents.

Figure Your Budget

You need to establish your financial goals for short term and long term. You want to figure what interest rate you would like to find, and establish what you would like to pay every month. You will also want to figure when you would like to be out from under any type of mortgage. If you go online, you can find free mortgage and mortgage refinance calculators that will help you figure interest rates and repayment schedules. You should also pull your credit ratings so you know how you look to prospective lenders. Also, check and correct any discrepancies.

Start Your Search

Once you have gathered your documents and figured your finances, you will start hunting for a lender who will offer you good interest rates and comfortable payments for a bad credit home loan refinance. While you may want to check locally with banks and credit unions as well as store-front lenders, your best bet would be to check out refinance companies who have set up shop online.

Online Lenders

Fire up your computer, get on the net, and punch your browser with bad credit home loan refinance. You will rewarded with scores of lenders that may be willing to work with you. You will also find brokers who will take your general financial information and will return a list of lenders who would most probably lend to you in light of the information you have given. As with any online application, you should be sure the websites where you divulge personal and financial information is secure. You will want to check the credentials of any lender you may choose for your bad credit home loan refinance.

Buyer Beware

You can check on the reputation of lenders by checking the online listings of the Better Business Bureau (BBB). The BBB will have assigned grades to each lender and at times you will even find customer feedback. You will want to gather a list of at least 10 lenders. Getting quotes from each. Let each lender know that you are getting quotes from other lenders. You should be able to pick and choose to get the best deal. Also, be sure to read the fine print before you sign anything. With a little research and diligent shopping, you will soon be making home loan payments that are easy to handle and have a good interest rate.

FHA Mortgage Home Loan Credit Requirements

Credit requirements for FHA Loan are comparatively less stringent as compared to

  • Conventional Mortgage Loan
  • VA Mortgage Loan
  • USDA Home Loan

The first thing to understand is that there is no specific score requirement specified by FHA. The loans are underwritten based on overall credit profile of a borrower. Most lenders use automated systems like Desktop Underwriter by Fannie Mae or Loan Prospector by Freddie Mac, along with investor specified credit score requirements, to determine eligibility. If the loan is auto approved by DU or LP and score requirements are met then other factors like lates (Not Mortgage Lates), collections, charge offs are accepted, relatively easily, by underwriters. Generally a prospective Buyer may not like to pay charge offs or old collections and this may be possible on an auto approval.

Judgments and Tax Liens

Judgments and Tax Liens are a different ball game since these affect title. A 12 month history from IRS may be accepted by certain lenders and prospective Buyers may not be asked to clear the entire outstanding tax Lien in one go. Judgments normally need to be paid.

Credit Scores 640 + or 620 +

Credit requirements required by majority FHA Home Loan Lenders has already been increased to 640 for the past few months now. The earlier score requirements were 620. There are some lenders who will finance borrowers with 620 + fico. There are no additional pricing hits for FICOs being below 640 and above 620.

Credit Scores Below 620

Few FHA Home Loan lenders will accept such borrowers, if they have NO NEW lates in the last 12 months. Any new collections or charge offs opened as a result of lates before the last 12 months are considered OK.

No Active TradeLines or No Scores

The same principle applies. Some FHA Home Loan lenders will accept such borrowers if they have NO NEW lates in the last 12 months. Any new collections or charge-offs opened as a result of lates before the last 12 months are considered OK only if Non Traditional credit can be established. Non Traditional Credit for 12 months can be documented in the form of Rent payments, Telephone/ Cell phone payments, Electricity, Water, Garbage, Cable, Storage or any other payments made consistently for the last 12 months. Generally a combination of 4 Traditional or Non traditional lines are required.

Prospective Home Buyers should read comprehensive Lending information on FHA Loans, VA Mortgage Loans, USDA Loans, Conventional Loans.

Access the PreQual affordability Mortgage Calculator

Bad Credit Home Loans For Low Credit

Are you ready to buy a house? Do you have enough money to buy your dream house? You are probably going to need help financing such a large buy, which most of the time means getting a mortgage loan. A mortgage is an interest in buying a property, created by a written document, that secures paying back borrowed money to the mortgage company.

Home Loan Types:

* No Deposit Loans
* Foreclosure
* Refinance
* Combination Rate
* Home Equity Loans
* Affordable Homes
* Non Conforming Loans
* Credit Impaired Loans
* Renovation Loans

Having bad credit is not the end of the world but, finding that perfect home loan that matches your credit is disappointing to many people you need to find a company that matches your need to a qualifying lender who can help you.

When you take out a mortgage loan to buy a home, the home becomes the collateral for the loan. If you don’t pay the loan back as agreed, the lender may take your property and sell it to satisfy the debt. So before apply for a mortgage, make sure that you are able to pay the monthly money back to the loan company.

You can also get relief from high mortgage and interest payments with bad credit mortgages just if you repay your loan back every month on time. You can also get much more, Bad credit mortgages give you the chance to clean up your credit.

So before you apply for a home mortgage try to find out what kid of mortgage you need to get, then collect all of the information you need to know before you talk to any company or lender. Remember that if you have enough information and you do not feel disappointed for the first “no” you hear from the lenders, you will get to your loan faster and easier.