Refinance/Bad Credit
If you have bad credit, you probably realize the worst by-product of it all is that you can’t get a low interest rate when you want to refinance or apply for a mortgage. Refinancing when the rates are low is an ideal way to lower your payments on your mortgage. However, that can be difficult to do when your questionable credit history throws a wrench into the works.
There are a few steps you must take that are essential to the process before you sign on the dotted line.
1. Check your Credit Score
Your credit score(s) determine whether or not you will qualify for refinancing and what type of interest rate you will get. Usually, the higher the credit score the lower your rate will be.
2. Check your Home Equity
Lenders usually want you to have at least 20% equity in order to
refinance. Lenders typically will only finance 80% of the value of the home in a refinance.
3. Shop Rates
You may not find a lot of difference in rates due to recent laws in the banking industry but it always makes good sense to research all of your options on rates and term lengths.
4. Cost of Closing
There are other costs associated with a loan. Some of the more common major cost and fees are; Loan Origination Fees, Application Fees, Appraisal Fees, Points, Lender Home Inspection Fees, and Private Mortgage Insurance. The fees can vary from lender to lender, so it is a very good idea to understand what your closing costs may be and to make sure that the refinancing savings outweighs the cost.
5. Gather Important Documents
You may be surprised at the scrutiny lenders apply to potential borrowers. Some of the information you will need is documentation about your current loan, income tax returns, savings and investment information. You also will need to prove employment and current income.
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