Bad Credit Mortgage Refinancing

The average family or individual may at some point in their life struggle to overcome bad credit and develop a good credit score. If you are seeking to secure a bad credit loan or simply want more information on bad credit mortgages and mortgage refinancing options, you should first gain an understanding of bad credit, your credit history, and how it will affect your chances of obtaining bad credit loans and taking advantage of useful mortgage refinancing options.


1. How Bad Credit Limits You

Financial management is a challenge for many working people and having bad credit can limit us in a variety of ways. Bad credit negatively affects your chances of making large purchases, such as a car or a home, smaller purchases, or even obtaining credit cards. There are people who have already purchased a home but have fallen captive to the challenges of bad credit. In this situation, one of the best options to reduce the financial burden on yourself or your family is to seek ways in which you can reduce your monthly expenses while developing a strategy to pay off your short term and long term debts in a manner which allows you to take control of your financial situation.

One solution that you might choose to look into is how to mitigate the effects of bad credit by working towards bad credit mortgage refinancing on your home. Bad credit mortgage refinancing allows you to obtain a loan on your home in the same amount of your current mortgage loan, while getting a lower interest repayment rate. The lower interest rates on a bad credit mortgage refinancing loan, will assist in lowering your monthly repayments, allow you to free up some of your personal capital to assist in decreasing your short-term debts and thus, move you out of the realm of bad credit. Before taking on a large financial responsibility of a bad credit loan or a bad credit mortgage refinancing option, it is wise to examine your current financial situation in detail prior to securing another loan.

2. How Do You Find Out If You Have Bad Credit?

If you are concerned about your credit score, the first step is to get a credit report. Understanding what is known as your FICO score is a crucial step towards eventually gaining a bad credit mortgage or towards mortgage refinancing. The FICO score is the median credit score on your credit report generated by the standard credit reporting agencies, which the majority of financial institutions or any private lending entities that need information on your credit score refer to. There are a number of online services which allow you to obtain your credit score for a minimal enrollment fee, or for free, within the first 30 days of registering with their service. Arming yourself with as much information as possible about your bad credit situation before you seek mortgage refinancing options or bad credit loans is important to ensure that you secure the best terms of agreement for your situation. Compare your scores with different credit reporting agencies. Some reporting agencies may still have you down as owing for certain debts which you may have already paid. In such cases you should notify the agency as soon as possible that payment has been made. Get the negative account removed from your credit report in order to improve your overall FICO score.

Go through your credit report in detail and write your own explanations of the credit accounts owing. Try to remember if certain accounts might have been paid and if you saved any written documentation to prove this. If not, write an explanation anyway, as this will be helpful in giving a loan officer as much information as possible before determining if they can secure a bad credit mortgage, a mortgage refinancing option, or various bad credit loans for you. It is important to be honest with yourself and your financial advisor about your credit to find the best possible solution to changing your bad credit to good credit.

3. Other Factors That Can Affect Bad Credit Loan Approval: Chexsystems

Chexsystems is similar to a credit reporting bureau. It is a check verification service that monitors how individuals handle negative or positive credit balances on their accounts. If you continually bounce checks, the bank has a right to revoke your account and enroll you in chexsystems. All banks and financial institutions have access to your chexsystems report. To gain a mortgage refinancing loan, or a general bad credit loan, the majority of financial institutions will require that you have a conventional deposit account whether it be checking, savings, or otherwise.

Once you are enrolled in chexsystems by a financial institution, this means that you are no longer eligible for a conventional deposit account and thus have a good chance of being denied when attempting to apply for a bad credit mortgage refinancing option, or any types of bad credit loans. You can get out of chexsystems by resolving an issue with a bounced check or by waiting 5 years for your chexsystem account to be erased; however, your application for a bad credit loan or a mortgage refinancing option will not be approved while you are enrolled in chexsystems. It is best to deal with this situation first before even seeing a loan officer about the possibilities of securing a bad credit loan or mortgage refinancing option.

4. Get a Bad Credit Counselor

Tackling your bad credit situation alone can be an overwhelming and daunting task. Rather than attempting to alleviate your financial burdens alone, secure the services of a reputable bad credit counselor or a financial advisor. While such services might come as an initial expense at first, in the long-term, a bad credit counselor can help you change your bad credit scores and also help you explore the available bad credit loan options.

5. Why Bad Credit Mortgage Refinancing is a Good Idea

Obtaining a bad credit mortgage or seeking assistance with mortgage refinancing are good ideas because they decrease the limitations that have been placed on you by bad credit. There are ways in which you can reduce your mortgage interest rate of repayment by seeking a mortgage refinancing option, and you can also secure a bad credit mortgage refinancing loan which allows for a longer repayment term above and beyond the typical 20 or 30 year terms that are generally available for mortgage loans. Mortgage refinancing does allow you to decrease your monthly mortgage loan repayments, and it also opens up the possibility of consolidating all of your debts into one monthly repayment option rather than making several payments to different lenders on a monthly basis.

6. Small Steps towards Securing a Bad Credit Mortgage Refinancing Loan

Remember that before you consider walking into a bad credit mortgage refinancing loan you should think of a number of ways in which you would be able to improve your FICO score on your credit report with your bad credit counselor. Even those actions of repayment that you may think are the smallest steps can make a difference in improving your credit scores and thus improving your chances of securing better mortgage refinancing loan terms.

Keep in mind that a person seeking an initial bad credit mortgage for a first home will usually have to pay at least 30 or 35 percent more in interest repayments than a person with clean credit. So, in order to take advantage of bad credit mortgage refinancing options try to do as much as you can towards bettering your credit scores before securing the mortgage refinancing loan. This way, although you will have higher repayment terms than a person with good credit, you will be able to get better terms on the interest rate repayments for your loan.

7. How to Secure a Bad Credit Loan?

A bad credit loan can be secured from a bank, credit union, or private lender. Typically financially institutions such as banks or credit unions examine your credit reports in detail and will usually not issue a bad credit loan particularly if you lack additional collateral to secure a bad credit loan. Those with bad credit usually have more luck securing a bad credit loan with private independent lenders.

If you are seeking a bad credit loan to assist in paying off other debts, a good option for securing loan assistance when you already own a home is too examine the possibility of applying for an home equity loan. A home equity loan allows a borrower to borrow against the monies already paid off on an existing mortgage on the borrower's home, and that loan money can be used as liquid capital. A home equity loan can give you the financial means required to assist you in paying off short term debts which are increasingly affecting your bad credit history over time. Although you may have a high interest rate to pay on the loan, the home equity loan may allow you to rid yourself of the smaller items on your bad credit report. Such small but negative accounts portray you, as a borrower, in a bad light to the potential vendors and lending entities. Obtaining an equity loan can also assist you in relocating your debts into a solidified area and remedying your bad credit over the long term.

Consolidating your debt can make the task of repayment less overwhelming and more manageable. However, if you are looking to secure a bad credit loan to make a large purchase such as a personal use vehicle, it is possible to secure such a loan with a private lender at a high interest rate. In such cases you may want to reconsider accumulating another large debt which further affects your FICO scores and gives you less financial means to decrease your overall debt in both the short and long term.

8. Choose Your Bad Credit Lender Wisely

As a person with bad credit seeking a bad credit mortgage loan you are well within your rights to approach financial institutions and private lenders for assistance. However, you may get further by securing a middleman of your own choosing, such as your bad credit counselor. A bad credit counselor or financial advisor can act as an intermediary between you and the financial institution, or the private lender that you are dealing with, and will very likely be able to get you a better rate of interest on your bad credit mortgage loan than you would if you attempted to navigate your bad credit loan options alone.

Unfortunately, you will be barred from exploring certain loan options because of a bad credit score, but there are still options for people seeking a bad credit mortgage loan, although at higher interest rates. If you have difficulty obtaining a bad credit mortgage loan from a well known lender, you may have to work with a subprime lender who makes loans to people with extremely bad credit and stipulates stringent terms of repayment that can often place you in a predicament worse than when you began your journey towards obtaining a bad credit loan or mortgage refinancing option. Think carefully about whom you want your lending agency to be before making the decision to go with a subprime lender.

9. Getting the Best Mortgage Refinancing and Bad Credit Loan Interest Rates

The importance of shopping around for bad credit mortgage loan rates can not be underestimated. Try to inform yourself of the best possible options by gaining as much information as you can on APR interest rates, as well as any additional fees and insurance that you might have to pay when securing a bad credit mortgage refinancing loan. Average interest rates for a person with good credit tend to be within the range of 5 to 7 percent, so you can expect to pay a higher interest rate than this as the interest rates on a bad credit loan are usually much higher. The actual repayment costs may be more than the initial calculation based on the loan amount and the basic interest rate, when you take into consideration the additional fees that many financial institutions may charge you. So speak to your bad credit counselor about what possible additional fees or expenses that you may have to incur as a result of seeking a bad credit loan.
Overall, although the options are limited, defining a successful strategy for decreasing debt, mitigating the impacts of bad credit, and effectively securing a bad credit loan or a bad credit mortgage refinancing option is possible.
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