The major housing bust of the last decade has left a lasting impression on many home owners' credit reports. Due to the nasty increases in adjustable rate mortgages, housing payments have gotten out of control and home loans are falling into default. If you are in such a situation and are watching your bad credit become worse, the option of refinancing your home loan could be the last available in order to avoid foreclosure.
What Is a Home Loan Refinance?
When you opt to refinance your current home loan, you essentially take the old loan and its immense burden out of the equation and off of your credit report through repayment with a new loan. This will help you to save your home because the process of home loan refinancing will decrease your monthly payment to make it more manageable given your current income and associated financial condition.
Even with bad credit, home loan refinancing can be an option since many lenders have seen an increase in defaults and cannot handle one more empty home on their books. As a borrower in trouble, you should take advantage of these special offers to both save your home and salvage your bad credit.
Home Loan Prep Work
Before you start the process of finding a refinance loan for your mortgage, there are certain steps you can take to improve your chances of getting a good deal. First, order a copy of your credit report from one of the three major credit reporting agencies: Equifax, Trans Union, or Experian. Look over this report thoroughly and double check that there are not accounts or statements on there that are false. Having inaccuracies on your credit report can needlessly lower your overall score.
Next, make sure that you review all of the paperwork that will be required to apply for refinance loans. Generally, this will include current information on your existing mortgage, income information, and other documents that prove your identity, residence, etc. By having all of this information together beforehand, you eliminate needless waiting periods once the loans application process has begun.
Finding a Bad Credit Lender
Though looking towards a traditional financial institution such as a local bank or credit union is a great option in some cases, for bad credit home loan refinancing, you really need to stick with a lender who specializes in loans to those with less-than-perfect FICO scores. Generally speaking, these lenders operate online and can be accessed easily through either web-based applications or telephone.
One important tip to keep in mind is to be sure to do a background check on any lender you are considering. Though many of the lenders you speak to will be legitimate, the internet is still rife with scam artists who will use your bad credit as an excuse to take advantage of you.
You Can Get Relief with Refinancing
If you feel like you are treading water with your home mortgage and there is little hope of relief, finding the right opportunity to refinance could be your lifesaver. Bad credit can certainly be a problem, but with the right preparation, it can be overcome and the home loan refinancing process can save you from drowning.