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Is it possible to refinance a mortgage with bad credit?

Author: Jessica Bennet
Community Mentor
Ask Jessica
Posted on: 19th Aug, 2007 07:00pm
If you have poor credit score, it does not mean that you don’t have any mortgage refinance option left. Though with bad credit, it is difficult to get approved for mortgage refinancing, but it does not mean that it is impossible altogether. You may still be approved for mortgage refinancing but with higher rate of interest. Here we discuss about the some things that you need to follow so as to get the mortgage approval with poor credit.



  • Examine your credit report carefully. Though it is possible to get approved for mortgage refinancing with bad credit but lenders will not agree to refinance your mortgage if your score is indeed very bad. In that case it is advised that you should postpone refinancing and should focus on improving your credit score.

  • By practicing wise financial habits, you can improve your score. You need to put in efforts to lower down your debts and should pay bills on time so as to give a boost to your credit score.

  • Find a co-signer with good credit score. Presence of a co-signer can augment your chances to get the approval for refinancing your mortgage.


Importantly, you need to shop around so as to get the approval for mortgage refinancing even with poor credit. Before making the final choice you need to make a comparison between different offers.
Posted on: 19th Aug, 2007 07:00 pm
in december of 05, my boyfriend bought a home with a fixed rate of 7.9% for 2 years and adjustable aftewards. (there is a penalty for early payoff) now it is almost time to refinance to a fixed rate but his credit score is lower than before.(late payments on mortgage, some unpaid credit cards and a garnishment. is it still possible for him to refinance or do he have to wait?
Hi csdancer,

Welcome to mortgage fit. Can you give us a bit more information. Specifically.......
1. What is the value of the home? What is owed on the home?
2. Do you know what your credit scores are? The best place to check is myfico.com the scores pulled there most closely resemble what a mortgage broker or banker will pull.
3. How late where the mortgage payments?
4. Are you able to verify income?
5. do you have reserves ie 401k or savings?

With this information we can better answer your questions.
Posted on: 19th Aug, 2007 07:43 pm
the last time i checked, the credit score was around 550, about 6 or 7 of the mortgage payment were 30 days late, income can be easily verfied and -0- in savings and i'm not sure about 401K.
Posted on: 19th Aug, 2007 09:24 pm
Hi Csdancer,

Welcome to the forum.

Though your credit score is quite low, yet you can possibly refinance. But your bad score will have a negative impact on your refinance loan as it may charge a higher interest rate. The lender charges the higher interest rates on the loan because of the risk involved in the credit transaction. So I think it will be better if you wait for sometime and refinance later. First, try to improve your score and clear some of your debts. To know how to improve your credit score, you can refer to: http://www.mortgagefit.com/credit-rating/credit-repair.html
Posted on: 19th Aug, 2007 10:13 pm
csdancer,

Do you know the value of the home? What is the approx payoff? Conforming loans while not score driven are risk based. The only way to find out what kind of rate you will get will be to apply with a lender or broker and have them run the loan through an automated underwriting engine........reserves is balance in the 401k will help possibly improve your rates.
Posted on: 20th Aug, 2007 04:55 am
Hi Csdancer,

I would ask you the same question as others - what's the value of your home? When have you determined the home value last time? If that's been a few months ago, then I think it's better you have an appraisal done as that will be required for the refinance. And, if it's been long since you have verified your score then it's time for you to pull out your credit report once again. Also, check your 401k account cash and find out how much you have in reserves.

It's good to have reserves as that helps in qualifying for a loan and even getting comparatively lower rate. Now, I would suggest that you repair your credit first and then go for the refinance. But if it's a necessity, then why not take a look into the lenders' profiles in our community. Or else, you can request us for mortgage quotes and we shall forward it to our community lenders. They will try to match their loan profiles with that of yours and if something good really turns out, they shall contact you asap.

Good luck :)
Posted on: 20th Aug, 2007 11:40 am
You can refinance at 550 score but you will likely have to be at loan value of 80% or less then the appraised home value. The loan will most likely have to be a full income documentation loan. The mortgage will have to be brought current and you can expect interest rates of 10% +. So if you think you fit all of the above and a loan at 10% would be good for you then you can start looking for a lender othervise you need to work on your credit score or look for alternative solutions.
Perhaps a refinance in your name if you have a better score can be done.
There some solutions but not all of them will make sence.
I guess the bottom line is if you want to refinance into a better loan in the future having lates on your mortgage is not a good idea.
Posted on: 20th Aug, 2007 12:41 pm
I own a duplex that is owner financed. I purchased the property under an LLc of which I am part half owner. I want to refinance the property in my name only. There seems to be problems because of the owner financing. My credit score is around 640. I have copies of all the cancelled checks showing on time payments since the property was purchased. Also I made a down payment of 30.000, there is a balance of 108,000.00. I want to refinace to pay off some debt and get a lower interest rate. The duplex is my primary residence.....there seems to be much confusion from lenders because of the LLC and the owner financing...any suggestions would be helpful...
Posted on: 02nd Sep, 2008 06:02 pm
You can do what is called a "loan modification"

*You can keep the same lender / mortage company
*We have attorney's that negotiate with your lender to give you a lower and more affordable payment
*You get to keep and stay in your home
*Does not matter what your credit score is
*You can be in foreclosure, have late payments, etc.
*95% Approval Rate

I am a Mortgage Professional, and I do stand by everything I post

Wholesale Financial
Jamila Miller - Mortage Coordinator
888-789-3998 ext.301
Posted on: 04th Sep, 2008 10:08 pm
To dbrides,

Are the lenders asking you to remove the property from the LLC so that you own it individually and not under the LLC name? If so, then you can use a quitclaim deed stating that as the grantor, you are transferring property under LLC to you as the individual grantee.

To jmiller:
Welcome to forums.

I hope you're enjoying participating in the forums. I've been reading some of your posts and it's good to have you amongst us. But I have a question here. Do you think in the situation as dbrides mentioned, a loan modification would be better than refinance? Moreover, it's not traditional financing, but owner financing that dbrides is involved with.

Thanks
Posted on: 04th Sep, 2008 11:40 pm
can you get a fha mortgae with a tax lien and judgements on your cr.
Posted on: 17th Sep, 2008 01:22 pm
Hi Rodney,

Please refer to a similar query at http://www.mortgagefit.com/fha/taxliens-judgments.html .
Posted on: 18th Sep, 2008 06:19 am
At the end of May, I applied for a refinance with a mortgage company. I was told that I needed to pay some extra on credit cards to raise my credit score. I did that and of course could not recoup on my budget. I was told that the rescore was where we wanted it and that the loan was approved. This went on up until today. I was told that the loan would close in August so I wouldn't have to worry about a mortgage payment. So, I didn't. Then I got an e-mail that said they had ordered a payoff and I had not made my mortgage payment. Because I had used the money to pay $450.00 for the appraisal that they had ordered. I was told that the loan would close on September 15th. So now I have 2 mortgages late and really don't know where to turn. I was told today that the loan would not be approved because of the late mortgage payment. Is there an option for me to refinance with anyone? Because I cannot catch up from this failed process, I really don know what to do.
Posted on: 26th Sep, 2008 09:41 am
m.l., you were given bad advice in August. i hope everyone who reads this will understand that being told that you "wouldn't have to worry about a mortgage payment" because you were about to close is advice never to follow - never ever.

always pay, under the assumption that your loan will not close. as you can see, the result is sometimes that you cannot close at all. you can always try another lender, plead your case (maybe even get a letter from your existing loan officer explaining what happened on their end) and perhaps get some relief.

what you'll need to do, no matter what, is to bring your mortgage current now. that is imperative and without a doubt the thing to do.

if you cannot catch up, you'll need to contact your existing mortgage lender right away to work out an arrangement. keep that arrangement and down the road, you'll probably have another chance to refinance.
Posted on: 26th Sep, 2008 11:42 am
i was told by my atty. that it would help if i could re-finance my house. i am currently paying 11% interest on my mortgage. i am currently up to date on my mortgage pyts., & they aren't included in my chapter 13 bankruptcy. what are my chances of getting my interest lower and would it be beneficial? thanks
Posted on: 29th Dec, 2008 10:39 am
donna, the reality of the marketplace is that while in bankruptcy, you're not at all likely to obtain a refinance. i don't mean to slam your attorney, but it appears that he or she is not on top of the mortgage market at this point.
Posted on: 29th Dec, 2008 10:50 am
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