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Bad Credit Home Mortgage

Bad Credit Home Mortgage Refinance - Pro's and Con's of Refinancing Home Mortgage

If you purchased your home during a time when mortgage interest rates were high, you have probably considered refinancing your home mortgage for a cheaper rate. In recent years, interest rates have dropped significantly. Thus, allowing many to save thousands on their home mortgage. If you have excellent credit, you may be able to refinance your home without hassle. Then again, if your credit score is less than perfect, you should weight the advantages and disadvantages of refinancing.

What are the Advantages of Refinancing With Bad Credit?

Refinancing your home loan with poor credit has several advantages. For starters, refinancing affords you the opportunity to "cash-out" your home's equity at closing. The funds received from your refinance are great for paying off debt, home improvements, retirement fund, dream vacation, etc.

The biggest advantage of receiving funds at closing is the ability to payoff debt. In most cases, individuals acquired bad credit because of failure to repay loans and credit cards, usually because they could not handle the monthly payments.

Refinancing may be the cure for bad credit. By eliminating unnecessary expenses, and reducing debt, you increase your credit score and improve your relationship with current creditors.

What are the Disadvantages of Refinancing with Bad Credit?

While refinancing with bad credit is ideal for receiving cash from your home's equity, if you have a low credit rating, finding a suitable lender and rate is challenging. People refinance for various reasons. This includes obtaining a lower interest rate, switching to a fixed rate, lowering the length of their mortgage, etc. However, if you refinance with poor credit, lenders may not offer the best terms or rates. In fact, you may receive quotes with a higher rate.

Nonetheless, numerous lenders (sub prime, high risk) offer refinance mortgages to individuals with bad credit or no credit. Before signing the paperwork, carefully weight the advantages and disadvantages of a refinanced mortgage. Moreover, you must thoroughly consider the savings. Refinances involve huge fees. If your overall savings are marginal, refinancing is not a good option. Attempt to improve your credit score, and then refinance your home loan.

Bad Credit Home Mortgage Lenders - 3 Things to Expect

Home mortgage lenders can get you into a home even if you have bad credit. When dealing with a subprime lender, you can expect easier application requirements. You can also choose just the right mortgage terms, from a fix rate to an interest only mortgage. Most importantly, you can expect reasonable rates from lenders who will provide you true customer service.

1. Easier Home Mortgage Application Requirements

You can look forward to easier application requirements from subprime lenders. Financing companies that deal primarily with people who have poor credit wonĄŻt automatically reject your application if you have a bankruptcy or foreclosure in your credit report.

Instead they will look at your entire financial record, including monthly income and assets. Then they will offer you a financing package. The better your credit and assets, the better your rates. Subprime mortgage rates range from 2% to 12% above market rates.

2. Flexible Mortgage Terms with No PMI

You also will have many more options when it comes to your terms, and subprime lenders donĄŻt require private mortgage insurance (PMI). So putting less than 20% down wonĄŻt cost you hundreds a year in insurance premiums. You can even find zero down or zero cost loans.

It is important to remember that terms also affect your rates and payments. For the lowest payments, look at an adjustable rate mortgage with caps. You can also find ARMs that refinance after two years to lock in rates.

Points can save you money by lowering rates. But, you may find that a better strategy is to rebuild your credit and then refinance for lower rates. If this is your plan, then make sure you donĄŻt have any penalty fee for early payment.

3. Reasonable Home Interest Rates from Legitimate Mortgage Lenders

Bad credit doesnĄŻt mean automatic high rates. Legitimate lenders will offer you reasonable rates. The key is to look for them. Online sites can help you find great rates when you request quotes. Search through broker and individual sites to find those hidden deals.

Online lenders remain competitive through their rates and customer service. So, many times you can find offers that waive fees or require no points. Be sure that you research all your options before signing any contract.