How to Refinance with Bad Credit and Save Money?

Answer 1

Many people with bad credit may be afraid that they will be unable to refinance their mortgage. However, a refinance may be needed desperately to save that family money or even save their home. It is true that many lenders are wary of lending money to people with bad credit. However, it is still possible for those people to obtain a refinanced mortgage.

First, to refinance with poor credit, a family should start saving money to pay off closing costs and other refinancing fees. A mortgage refinance will actually create a completely new mortgage. Due to this fact, no matter who a family chooses to refinance with, there will be certain out of pocket expenses that must be paid. These can include closing costs, application fees, and appraisal fees.

If you have filed for bankruptcy, you should wait at least two years after that bankruptcy to attempt to refinance. A recent bankruptcy as well as a recent repossession will usually result in a mortgage refinance being rejected. Some time will be needed to re-establish a person�s credit to make that person look trustworthy enough for a new mortgage.

Next, you should look for a lender that specifically offers refinances to people with poor credit. This will take some time and effort. After the recent recession, many lenders have stopped offering subprime loans. However, keep a look out. When you do speak to a lender or mortgage broker, you should inquire about a FHA mortgage refinance. A FHA refinance is designed specifically to help homeowners in peril refinance their mortgages so they can keep their homes.

Once you have found a lender that does offer refinances to homeowners with bad credit, fill out the application for the new mortgage. Once finished, submit it. Make sure to include all required documents such as bank statements, paycheck receipts, and tax returns.

You should also attempt to obtain a lower interest rate on this new mortgage. One way to do that is by paying points. Often a bad credit score will result in all lenders giving a homeowner a very unreasonable interest rate. The homeowner should remedy this situation by paying points. A point in this context refers to an extra $1,000 that is paid during the closing. In most cases, for every point paid, a lender will lower the interest rate of the refinanced loan by 1 percent.

Lastly, schedule a date for the closing. This will involve meeting with the lender and signing any required documentation.