Bad Credit Loans

How to Refinance When You Have Bad Credit

Is it impossible to refinance your home loan when you have bad credit? No, but it is harder to find lenders who won't charge you higher fees and a higher interest rate when your FICO credit score is mediocre.

Refinancing to get a better rate, though, really only makes sense if the person applying for the loan has a good strategy on what to do with the funds.

Peter Boutell, mortgage consultant with a Santa Cruz, California mortgage company, also writes a column "Lending A Hand."

Boutell says: "Saving money and creating money are the two big reasons to refinance. The key to making sense or not hinges almost entirely on how long the homeowner will keep his or her loans in place."

Debt consolidation with a home equity loan has its critics, but it has become a very popular way to reduce debt and reorganize a person's monthly budget, It seldom gets you out of debt. Instead, it reshuffles the debt like a deck of cards.

By forming new credit habits, where you don't dig yourself into a deep credit hole again, such a debt consolidation could be the best past to getting debt free, and getting relief from a home equity loan my be your best option.

When money was available to anyone who could fog a mirror, consumers were opting for those popular 10-year-fixed, interest-only loans when they are buying or trying to refinance their property. The interest rates were locked in for the first few years. The buyer then paid only interest, making the loan seem more affordable.

However, as local housing markets failed to perform and raise the value of the home by the time the loan was recalculated, mortgage payments reverted to principal and interest on the balance, and then housing payments rose significantly. Higher payments, no equity build-up. Big problems brewing.

This is what's happening now with the subprime mortgage meltdown we're seeing nationwide.

Refinance home mortgage at your own speed, and carefully compare each lenders best terms and conditions. Do your homework and take action to fix your credit report and eventually get better credit score. With an improving credit score, you're likely to negotiate a better deal, and not have to even consider a poor credit loan after all.

For more programs to help you buy a home, even if you have bad credit, visit www.hud.gov , as the government programs seem to have the best options available to help the average consumer get into the home they can afford, even if their credit score is mediocre.



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