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Mortgage Refinance Options for Individuals With Bad Credit


Mortgage Refinance Options for Individuals With Bad Credit

If you are looking for mortgage refinance options but have bad credit, there are still ways you can refinance. You can work with a lender who offers bad credit home loans and they will help you get a better rate on your mortgage and replace your existing debt obligation with another debt obligation under different terms that work for you. Here are some important tips for getting the best possible mortgage refinance rates even if you have bad credit.

Showing patterns of good credit, even if there are some negative marks on your credit record, can help you get approved. A few delinquencies can be explained and won’t necessarily destroy your chances, especially if they are due to temporary drops in income or rate adjustments that increased your payment. Having good lines of credit is important to re-establish your credit and this will help you have more mortgage refinance options.

The Home Affordable Refinance Program is a program that will help you restructure your loan terms if you borrowed from a bank, credit union, or mortgage company owned by Fannie Mae or Freddie Mac. With this program, the borrower can receive a fixed interest rate, a lower loan payment, and sometimes a principal reduction. The program is a mortgage refinance qualification program that was designed for homeowners who owe much more than their home is worth but are re current on their mortgage.

If your home loan is insured by the Federal Housing Administration, FHA mortgage programs have more lenient qualifying guidelines so be sure to find out what you refinancing options are.

According to Total Mortgage, it is important to explain your circumstances and financial history to your the lender so they can help you find the right terms for you:

You can also check and see if you qualify for the Home Affordable Modification Program. This program will help you to reduce your monthly payments to a percentage of your pre-tax monthly income. This program will help you keep up with your payments.

Go Banking Rates offers more mortgage refinance options, “Instead of a traditional refinance, HAMP offers loan modifications, which can include a different interest rate, loan balance and loan terms. Mortgage modifications are a good alternative to bad credit home loans because modification interest rates can be lower than the current mortgage rate trend of between 3 percent and 5 percent. For example, some HAMP recipients’ interest rates can be reduced to as low as 2 percent to avoid foreclosure and then gradually increase after five years.”

Remember to be honest with your lender about your financial history can help you bolster a spotty credit check during the home loan application process. Explaining why you have bad credit–and more importantly, the steps you have taken to resolve the situation–can sometimes provide lenders with a more accurate overview of your credit history than a computerized scoring system.

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