Poor Credit Refinance and PMIs

Having bad credit is no fun. But cheer up, America does not have debtor's prisons like in Jolly Old England, and there are credit repair and restoration programs galore. The good news is, if you're still dreaming of getting a home loan, you can find lenders that will work with you. Whether you're looking for bad credit refinancing or a poor credit second mortgage, you may have to absorb higher interest rates. If possible, you should shop around.

Researchers say it's hard these days to profile a person with bad credit. That's another reason to not take your situation too hard. Six billion Americans received new credit card offers last year as the national consumer debt topped $2 trillion. That being said, what can you do personally to afford a bad credit mortgage refinance, and at the same time restore your poor credit to the pink?

Bad Credit Refinance Options

Search the lenders you find online for competitive rates. A bad credit mortgage refinance loan can help consolidate your debts AND swing your credit score into higher numbers. The so-called short-term pain of the rate will more than pay off in the long term. And you may not have such a high rate.

If you're borrowing more than eighty percent of the fair market value of your home, a lender may ask you to attain Private Mortgage Insurance (PMI). PMI can definitely lower the interest rates on your poor credit refinance, but the amount is not applied to equity.

If you do have to accept the PMI, remember that once you have 20 percent invested in the principle, you can ask for a reappraisal to remove the PMI. It won't affect your low interest rate if you do!

Bad Credit Comeback Loans

Now there's a new product in town for those of you who are worried that credit issues will only qualify you for a bad credit mortgage. It is called a credit comeback loan and it is designed to help you purchase a home or refinance an existing one without resorting to a bad credit loan with exorbitant interest rates.

How Does a Credit Comeback Mortgage Loan Work?

Borrowers who suffer from bad credit are often put into bad credit home loans with high interest rates. A Credit Comeback Loan allows a borrower to qualify for a 30 or 40 year fixed rate loan or an adjustable arm (including interest only options) and drops the borrower's interest rate by .375% per year (for up to 4 years) if the borrower makes her mortgage payment on time. This can mean a reduction of up to 1.5% on the borrower's interest rate! After the four year period is over, the borrower now has a fixed rate for the life of his loan and avoids the need to refinance out of a higher interest rate bad credit mortgage.

When Should I Look into a Credit Comeback Loan vs. a Bad Credit Mortgage?

Don't settle for a bad credit mortgage, if you are looking at a new home purchase or a refinance and the rate you are quoted is over 7.5%, talk to your lender about a credit comeback loan. Credit comeback loans will allow borrowers whose fico scores are as low as 500 to qualify for a home mortgage loan. Don't settle for the exorbitant rates of a bad credit mortgage; realize your dreams, while improving your credit, with a credit comeback loan.

Knee-Deep in Debt and Bad Credit Doesn't Mean You Can't Refinance

Many homeowners become immobilized by fear and think they can't qualify for a loan because of bad credit. The truth is that life happens--emergency medical bills may have begun the cycle of bad credit for you--but there are things you can do to improve your bad credit and refinance your loan.

The important thing to keep in mind with bad credit is that lenders want to make you a loan--you just have to find the right kinds of lenders that can work with people with poor credit. You can't sit around and wait for your credit to magically improve, or hope that time will cure all ills--you need to take action. If you want to make home improvements, don't let your bad credit prevent you from applying for a mortgage refinance.

The First Step to Improve Your Bad Credit

The first thing you can do towards your goal of a mortgage refinance, and forgive me if this seems obvious, is to find out exactly how bad your credit really is and why. Go online to one of the credit agencies and get a free credit report. Check your report thoroughly for accuracy. There are countless cases of people who found and disputed mistakes on their reports, making significant headway on improving their bad credit.

Pay Off What You Can

Any small debts you have you should pay. The little amounts can really add up, but they are also one of the easiest places to start in improving your credit. Try to pay your credit card bills down to less than half of the card's limit. This helps prove to lenders that you are not already over-extended.

Take Action

By making these small strides to improve your situation, you'll be better able to qualify for the loan for which you've been looking. Bad credit will not totally prevent you from qualifying for a mortgage refinance. If you want to refinance your mortgage but have bad credit, the worst thing you can do is nothing.

Bad Credit Refinance: The Only Color that Should Matter is Green

While lenders might defend their predatory tactics by saying that certain minorities or ethnic groups statistically pose a higher credit risk, the fact of the matter is that there are a number of companies out there looking for easy victims and a quick buck.

Minorities looking for a bad credit home loan refinance are often targeted with no-hassle advertising messages followed by high-pressure sales tactics. While it is understandable that someone with bad credit might pay a higher interest rate on their mortgage refinance, is it fair to have an inordinate number of sub-prime lenders seeking out business from minorities?

Mortgage Refinance Numbers

A study conducted in Texas a few years ago revealed astonishing numbers. Of the borrowers who earned greater than $60,000 annually and borrowing less than 2.5 times their income, 16.7% of white borrowers obtained a mortgage refinance from a high-cost sub-prime lender as opposed to over 30% of Hispanics and almost 47% of African Americans. According to the Washington Post last year nearly 30% of African Americans ended up with high-cost loans compared with only 10% of white Americans.

Bad Credit Protection

For those of you who are minorities, have bad credit, and are interested in a mortgage refinance -- there are steps you can take to protect yourself from predatory lenders:

* Get quotes from more than one lender
* Ask questions
* Don't fall prey to high-pressure sales tactics -- if you don't feel comfortable with the lender then don't get the loan.

These are a just a few tips to help you protect yourself. Getting a bad credit home loan refinance doesn't mean you have to get taken for a ride. Watch out for the deal that is "too good to be true" because it probably is. Many of these lenders have created programs that perpetuate risk and make things more challenging for the borrower. Sometimes this can lead to foreclosure. Prevent this from happening to you by asking questions and keeping your eyes open.

Bad Credit Refinancing: Will the Market Players Respond to Consumers Needs?

Across the country, many homeowners with adjustable rate mortgages (ARMs) and interest-only home loans are anxiously watching their rising mortgage payments, worrying about foreclosure, and wondering if they can refinance. Well, some of the major lending organizations are trying to help.

Alternative Loans, Like ARMs and Interest-Only Loans, Make Sense

There are situations where a hybrid ARM or an interest-only home loan is an excellent option for some homeowners, regardless of good or bad credit. If you plan to sell your home again before rates rise or if appreciation in your market is rising rapidly then these loans might be perfect for you. Many homeowners who got into these loans over the past couple of years, however, are now finding themselves facing falling home prices, rising mortgage payments, and the possibility the bank might foreclose.

The Mortgage Market Responds
Rather than wait for government regulators to force action, some of the major players in the mortgage business are adopting new principles for working with homeowners who face possible foreclosure. Some of these principles are:

* Contacting distressed borrowers immediately to work out payment arrangements.
* Making loans more affordable through reduced rates or changing terms.
* Providing refinance options to eligible borrowers at the lowest possible cost.

Some of the organizations who agreed to endorse these principles are:

* The Mortgage Bankers Association
* Citigroup, Inc.
* JP Morgan Chase & Co.
* HSBC Holdings
* Fannie Mae
* Freddie Mac

Senator Dodd, who has been pushing hard for this, said, "These principles represent a critical step in preserving homeownership and economic opportunity."

Don't Let Bad Credit Stop You
If you're worried you might not be able to meet your mortgage payments in the future, you need to contact your lender right away. Don't hesitate simply because you have bad credit--the longer you wait, the more limited your options might become. You might still be able to refinance your home loan or work out other payment arrangements.

How Bad Credit Can Affect Your Mortgage Refinance

Refinancing your mortgage may be possible if you have bad credit, even if you've discharged a bankruptcy. However, your credit score and other qualifications will affect your mortgage refinance pricing.

Having Bad Credit Means You Pay More

Even in today's changing housing market, there are many lenders who specialize in bad credit mortgage refinance, often referred to as subprime lenders. While your bad credit might not prevent you from getting a loan due, it will influence several aspects of your refinance.

Your Credit Score

One of the biggest factors lenders consider when qualifying you for a mortgage loan is your credit score. A score of 740 or higher is considered very good or excellent, and less than 600 is usually considered bad. A number of things can cause your low score: late payments, bankruptcy, too much new credit, high balances, or collection accounts. Get a copy of your report before you apply for your mortgage refinance and make sure all your information is accurate.

How Bad Credit Affects Mortgage

PricingLenders generally classify borrowers into four groups: A, A-, B, C, and D borrowers. A and A- are those with passable to excellent credit. B, C, and D are those with bad credit. In this group, scores range from 400 to 620 and borrowers usually pay higher rates and higher fees. If you are a C or D borrower you could pay much higher interest rates and fees, and receive much less favorable terms than those with good credit.

Ask Questions About Your Loan

Your bad credit will undoubtedly affect the price of your mortgage refinance, but that doesn't mean you can't ask questions or negotiate. Some less scrupulous lenders will tack on as many fees as they can--and many borrowers never question it. To get the best deal possible, request offers from at least three different lenders, and review the paperwork thoroughly. When it comes to fees and points, look for charges you can negotiate.

Bad Credit Mortgage Refinance: Clearing the Air about Closing Costs

Closing costs are one of the biggest sources of confusion and many homeowners, while thinking they might be paying more than they need to, fail to speak up and try and negotiate. You can negotiate closing costs in a bad credit mortgage refinance.

If you have bad credit, you might be feeling a little desperate and may not be as inclined to make noise or ask questions when applying for a mortgage refinance. You might be dealing with lots of stress and thinking more about your next move than about saving a few hundred dollars.

Bad Credit Refinances Often Have Extra Fees

There is no escaping some closing costs, such as the title search, credit check, or appraisal fees. However, even in a bad credit mortgage refinance, some fees can be negotiated:

Points: up front fees that are paid in order to get a lower interest rate.
Attorney's fee: this fee is not applicable everywhere.
Application fee: most lenders will charge this but it can be waived.
Doc fees: where many lenders try to pad their fees.
Appraisal fees: paid for appraising your home. Don't agree to these until your credit been approved and you have been given a firm rate commitment.

Ask questions about the fees involved in your loan and ask what can be negotiated. Don't forget to shop around with different lenders.

Your Mortgage Refinance Doesn't Need to Be a Mystery

Remember that while you may really want to get the loan, the lenders are fully aware that they are competing for your business. A bad credit refinance doesn't mean you don't have the right to save yourself some money. Your loan officer is not only guiding you through the process to get you the mortgage refinance you need, he or she is also conducting business. If you don't speak up and ask questions, you might miss the opportunity to save some money.