One of the most common ways to improve ones financial situation is to refinance a loan in order to secure a lower interest rate. When this is done with a home loan it is called a remortgage. For many home owners the need to remortgage is extreme because of financial problems that have accumulated over the course of several years. These financial problems could have lasting effects because of damage to the home owners credit score. In this situation it is necessary to seek out what is called the bad credit remortgage.

When buying a house it is generally understood that the buyers financial situation is in good standing and somewhat secure, otherwise you would assume they wouldn’t be seeking to go into hundreds of thousands of dollars of debt. But life happens and things change. Children are born and there are more mouths to feed, clothes to buy, etc… Changes in economic climate as well as accidents and medical problems can result in months and even years of unemployment. A missed or late payment on a debt can begin a snowball effect and before you know it you are in trouble. At this point it is in ones best interest to take action or to seek help before all savings are depleted and you are facing foreclosure or bankruptcy.

Bad credit mortgage lenders understand that life happens and it is always in their best interest to get you into a loan that suits your financial situation. They will take your current financial status into consideration and do their best to make sure you are comfortable with the remortgage and will be able to make the payments on time.

When seeking out a bad credit remortgage you still have the advantage of being a property owner and as such you are much less of a risk to mortgage lenders. Your property will be used as collateral for the remortgage loan and you will have to risk losing it, however, if you are able to negotiate a lower interest rate you stand to save thousands of dollars. You will still need to go through the application process and there will be inquiries into your finances in order to determine your debt to income ratio. Your spending habits will also be scrutinized so be sure to have your other debts in order. Get all your bills paid up to date and keep your spending to a minimum for at least two months prior to applying for a bad credit remortgage loan. If all goes well, you may also be able to draw from your equity in order to pay off other debts.

As a note, remortgages can be used for debt consolidation. Consider how much interest you pay on your credit cards and compare that to the interest you will pay for your mortgage. In many cases it may be smarter to pay off high interest debts, such as credit cards, with cash that becomes available after remortgaging your home. Would your mortgage payment be more manageable if you didn’t have the monthly credit card bills to deal with? Are you paying only the minimum due? If so, how long will it take to pay all your cards off? There are remortgage programs set up specifically for getting rid of credit card debt.

If you are a home owner and having financial trouble, rest easy and know that there are solutions out there for you. Talk to your loan officer, research the internet, and talk to friends. Finding out what your options are and making a plan that you can stick with will get you where you need to be.

Tags: bad credit mortgage, bad credit remortgage, debt consolidation, mortgage lenders, remortgage

If you are planning to buy a house or refinance the one you own, your credit score is of paramount importance and it is in your very best interest to know what your score is and to take whatever action you can to be sure it is as high as possible. If your credit score is below 600, getting a mortgage with bad credit will much easier if you follow the steps below.

Before you apply you need to put together a plan to get yourself into the best possible financial position in order to get the best possible rates for your new mortgage. Bad credit mortgages are available however your credit score will directly effect how expensive your mortgage will be.

FICO Scores

When you apply for a mortgage your lender will make an inquiry to the three credit reporting agencies, Experian, Tran Union, and Equifax. Your mortgage lender will take the middle score or take an average of the three to underwrite your loan. It is a good idea to know what these scores are before you begin the loan process. If there is a problem it is best that you find it first and take the necessary steps to have it resolved before your mortgage lender puts your package together.

Looking At Your Scores

Equifax has your “real” credit score. The scores held by Trans Union and Experian are calculated using a proprietary process and will be different than Equifax. Only Equifax applies the FICO model to its data and therefore the other two agencies may have different data as well as mistakes. Lenders require reliable data and will use all three scores regardless. It is best to get all three of these reports and clean up mistakes and calculate an average in order to have a realistic view of what your lender will be using to determine your interest rate.

Revolving Balances

Revolving balances such as those created by credit cards are said to be necessary in order to show responsibility with debt. Many people believe that if they have kept up their payments, regardless of their balance, it will have a positive effect on their credit score. This is not necessarily true. Maintaining a balance that is too large can reduce your score considerably as it increases your debt to income ratio.

Your plan should include a rigorous effort to lower your overall revolving balances. The FICO model will place your revolving credit into one of five levels. These levels are determined by what percentage of your available credit you have used and are making payments on. These levels are 20%, 40%, 60%, 805, and 100% of your available credit. The lower the level you are on the higher your score will be. Therefore you should try to get this level down to 20%.

Examining Your Credit Reports

When examining your three credit reports you need to look at every entry very closely. Don’t assume for a minute that because it is in writing on your report it is accurate. Cross reference each record with your personal records such as monthly statements. I have heard of cases where information in the report is that of someone’s child who happens to have the same name, or information that is many years old and out of date. There have even been reports of data that just appears out of nowhere for no reason or perhaps because of an incident of identity theft.

Repairing and Removing Negative Data

Be aware that information that is over seven years old can and should be removed. You may also find duplicate data entries, both contributing to your overall score even though one is just a copy of the other. When a collection is ordered the reporting period begins when the first missed or late payment was due. Many times a collector will “reset” the clock either by accident or for some other reason causing the issue to continue being reported beyond its seven year limitation. Also, when a collector sells your case or returns it to the original lender, reporting should stop however this step is often overlooked.

Verifying Positive Data

Sometimes even the positive data can be missing or wrong which can also lower your overall credit score. Make sure that your credit limits are correct as well as the dates on which you opened your account. If your credit limit is listed as lower than it really is this it will increase your revolving credit percentage level. If the date you opened your account is recorded as later than when it was really opened it will look like the account is new and this too will lower your overall score.

A Few Tips

While repairing your credit for your loan whether it is a bad credit mortgage refinance or a new subprime mortgage, you do not want to make any large purchases before applying. This increases your revolving credit level and lowers your score. Wait until you are done with the mortgage loan before spending large amounts of money. Even if you have just come into an inheritance, you need to be mindful that the credit agencies will not be aware of you new found wealth and may see the large expenditures as frivolous behavior.

Mortgage brokers have a tool that you can use called a rapid rescore. With this tool you can show documentation regarding dates, credit limits, and balances, as well as proving negative data are erroneous or out of date. Your mortgage lender will then submit this new information to the credit agencies after which they are required to recalculate your score in three days. This service is not free however, the small fee may well be worth a lot of money in terms of the interest you will be eligible for with a higher credit score.

Your New Credit Score

In order to maintain a great credit score you do need to have a revolving balance. Yes, your score is determined by how much you owe in relation to how much you can potentially borrow however, having no history of balances being paid off on a regular basis can be seen as a lack of experience in managing debt. Therefore, after your credit is repaired you will also need to build positive entries in order to make your score the best it can be. This should be done as soon as possible because when new accounts are opened your score will fall for a spell until you have created a history of timely payment.

Getting a mortgage with bad credit is easy, however, getting the best deal possible by taking precautions and making the effort to get your credit score as high as possible is a bit more difficult and time consuming. The bottom line though is that your efforts will save you money.

Tags: bad credit mortgages, credit reports, credit score, FICO model, mortgage lenders, rapid rescore

Refinancing is good for homeowners who try to make their mortgage payments affordable since they are likely to default in their payments in near future due to rising mortgage rates or are already juggling their finances to pay for their mortgage. It makes sense to refinance your mortgage if the home refinance rates are good enough to benefit you. Weigh the pros and cons before you turn to mortgage refinancing. The following paragraphs will focus on why homeowners opt for refinancing.

Some of the prominent reasons why mortgage refinancing appear attractive to homeowners are as follows –

Lower the mortgage rate of interest:

The prevailing mortgage rates in the market are compelling you to shell out more each month. And this is straining your purse considerably. So, you turn to home refinance to make payments for your mortgage manageable. If the home refinance rates are lower than the original mortgage rate, take the opportunity to switch over to lower mortgage rates.

Alter the term of the mortgage:

There are many homeowners who want to pay off their mortgage earlier so that equity builds up faster in their property. So, they decrease the length of the mortgage term. Although the amount you have to pay will be higher but it is worth the cash you shell out if you can afford it.

If you are finding it difficult to pay for your mortgage every month, you can extend the term of the mortgage. In this case you can make payments comfortably since you get more time to repay. However, the rate of interest you pay will be higher.

Tap equity in property to meet financial obligations:

If you are able to build equity faster in your property, you can use it to meet your other financial obligations. This is referred to as Cash-out refinancing where you get some cash against the equity in your property. The proceeds can be utilized for meeting different financial obligations.

Change to fixed-rate mortgage from adjustable-rate mortgage:

One advantage of adjustable-rate mortgage is that you have to make lower payments in the initial years of the mortgage term. But as the mortgage rates in the market escalate, your payments rise too. So, if you are currently making payments as per ARM and you would like to make your payments affordable and predictable, home refinance is a good way to achieve your objective.

Recently, when the mortgage rates were at an all time low, there were many homeowners who opted for home refinance to prevent their homes from getting foreclosed. So, keeping in mind your long term goals, it is a wise move to refinance your mortgage provided it proves to be beneficial for you.

Tags: adjustable rate mortgage, fixed rate mortgage, home refinance, mortgage refinancing