Bad Credit Mortgage – Is it Even Possible?
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Admittedly, banks are very strict about refinancing bad credit mortgage, no thanks to the global recession. It may be more difficult to refinance mortgages in general than if the economy is on roll.
There is good news, however, as it is still possible to refinance your mortgage even if you have a spotty credit history. You just have to accept the fact of home loan life that the lower your credit score, the higher your mortgage payments get. That’s the bad news of refinancing on a bad credit mortgage.
Still, take heart for indeed refinancing on a bad credit is difficult, yes, but not entirely impossible.
Things to Consider
Approval for your refinancing on poor credit depends largely on your credit score. Plus, take note that you often will not be able to secure a lower rate than your original interest rate because of your poor score so much so that the lower your credit score, the higher your new interest rates will be.
Also, the reasons behind your poor credit score will determine approval for your bad credit mortgage. On one hand, if it is due to missed amortization payments by 30 days or more, don’t expect to have your approval since you will be seen as a high risk indeed on your prospective new mortgage contract. On the other hand, if it is due to high credit card debt and utility debts, then you might just get that contract although do expect to pay higher rates on it.
Also, if you believe that your ARM will result to higher monthly payments or rates, then go ahead and refinance. This also goes for option-ARM or interest-only options in your old contract that will be reset – refinance now or else face significantly higher payments.
Tips on Refinancing
To make refinancing on a bad credit mortgage easier and faster, you have to adopt the following tips with guidance from either a mortgage banker or a mortgage broker or both.
First, you have to obtain your updated credit report from any of the three credit reporting agencies – Experian, TransUnion and Equifax. Although you can often get it for free via their websites, be prepared to pay a small fee after a certain number of inquiries as well as to secure your actual credit score.
Second, you have to consider the ways with which to improve your credit score within the next few months to a year. Your mortgage banker or mortgage broker should be able to help you on this point. A good point to start is to correct the errors and update the information reflected on your credit report, which is possible when you write to the concerned credit reporting agency about your request together with proofs of your claims. This way, you have better chances of securing approval for your bad credit mortgage.
Third, you have to shop around. This is true for any type of mortgage since not shopping around means that you are missing out on the best deals possible. Your mortgage broker can perform this job for you as well as provide advice on which type of mortgage is the most favorable under the circumstances.
Indeed, bad credit mortgage is highly possible. You just need to know when and where to start with the assistance of a mortgage broker.
Allegro Mortgages Corp. – Best Broker for All Your Financing Requirements (416) 987-0008
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