Home  Mortgages 3 Issues To Consider Before Refinancing Mortgages With Bad Credit
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3 Issues To Consider Before Refinancing Mortgages With Bad Credit |
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Written by GeraldKanyingi
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Friday, 15 January 2010 |
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Previously it was challenging for potential homeowners with bad credit to obtain a mortgage loan. This has since changed with the many loan options available and various means for lenders to protect themselves. This gives people with bad credit a chance not only to find a suitable mortgage but also get re-financing options also.
by GeraldKanyingi
Previously it was challenging for potential homeowners with bad credit to obtain a mortgage loan. This has since changed with the many loan options available and various means for lenders to protect themselves. This gives people with bad credit a chance not only to find a suitable mortgage but also get re-financing options also.
If you have poor credit contemplate whether re-financing is ideal for you or not, the procedure is basically the same as it is for those with good credit. Homeowners exhibiting bad credit and are interested about re-financing should consult a mortgage adviser specializing in mortgages for those with bad credit.
Also, the homeowner needs to find out if their credit score has gone up or not as this will make him make an informed decision when deciding to refinance or not. Lets look at 3 issues you need to consider before you refinance your mortgage.
1. Consulting a Mortgage Adviser
Enlisting the advice of a mortgage adviser is good for homeowners with poor credit. In as much as the homeowners maybe conversant about re-financing but their unique credit situation requires that they talk to an industry expert. This is vital since a mortgage adviser is better placed to advice homeowners on the types of options available to the homeowners with bad credit.
Its critical that you be open and honest with the adviser. Even if you get embarrassed with your current situation, its good to be open as this will enable the mortgage adviser to arm himself with the correct and accurate information that is needed to advice you on what to do.
2. Improved Credit Scores
After being awarded a mortgage, homeowners should also check up and see if their credit score has improved over time. Its good practice to keep past documents of your credit score so that you can be able to see if its improving. Every person is entitled to receive one credit score per year from any of the major credit report bureaus. You can use the report to see the current status of your credit score. Items such as bankruptcies or other offenses do not normally remain on the credit report.
Such offenses are usually removed from the credit score over a period of time. Please note that the that the period in which the offense remains in the report is commensurate to the magnitude of the problem. For example, if you filed for bankruptcy, it will remain on the report for a longer period of time compared to a late bill payment. When reviewing their credit report, homeowners should look and see if previous offenses have been removed or not even as they concerning themselves with the credit score.
3. Refinancing - Consider the Options
Once a homeowner has made up his mind to re-finance the mortgage, it is time to start weighing the various options available. Most homeowners are under the false impression that they can decide the interest rate. Though this rate is largely dependent on the homeowners credit score, even those with poor credit can lower their interest rate by purchasing point. A point is can be stated as 1% of the total loan amount and may translate to a 1/4 of a percentage point on the interest rate. When deliberating if to purchase points or not, the homeowner should calculate the amount of time it will take to recover the cost of purchasing the points. This helps to guide the homeowner whether or not it is worthwhile to purchase one or more points when re-financing.
What types of loans are available when refinancing? We have the fixed rate, adjustable rate and the hybrid rate mortgages. With fixed rate mortgages, the interest remains the same, with adjustable rate mortgages the rate adjust and finally with hybrid loans, the rate is fixed at one time then adjusts itself over a certain time.
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