Mortgage Refinancing for Those with Bad Credit Report

By Andrew McAllister in Mortgages on March 11th, 2008

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by Andrew McAllister

Individuals with poor credit were prevented from applying for a first mortgage loan in the past if they had bad credit. Mortgage companies would avoid approving a loan to applicants with poor ratings. Those who already owned a home could not qualify for a mortgage refinance loan. Increasing competition in the market today has led to more options for people with a poor credit history.

One smart move is to find and consult with a mortgage advisor who specializes in people with bad credit. There are fewer options available to people in this position, but an advisor with this specialty is often aware of possibilities you would never imagine.

In addition, it helps to know what the mortgage company is going to base their decision on. Take advantage of your right to receive a free copy of your credit report every year - and don’t be taken in by companies who offer a “free” with a subscription to their service, they are absolutely unnecessary. By comparing your most recent credit report to those in the past, you will know if your credit is improving, remaining stable or getting worse.

Bear in mind that just because your credit rating is low doesn’t take away your right to dispute things on your credit report that might not be accurate. Mistakes happen on credit reports every day and by simply disputing those errors, your credit rating will often increase. You should also know that some things on your credit report will no longer show up after a certain period of time. Even bankruptcies will disappear after a few years.

When speaking with a bad credit mortgage advisor it is very important that you are open and honest about your financial situation. Bad credit mortgage refinancing is a tricky proposition and your advisor will be better able to help you if they know exactly where you stand. Otherwise you are at risk of not getting the best possible mortgage refinance loan for you.

Talk to your mortgage advisor and discuss all of the options. If you don’t understand something, ask them to clarify. Bad credit mortgage refinancing can be very confusing and you should never act like you understand something if you don’t! You always have the right to not sign on the dotted line.

Your individual credit situation will dictate your options to an extent, but bad credit does not mean you are without choices. Your interest rate will be higher than someone with good credit. Fixed rate mortgage refinancing loans are harder to get, but with adjustable rate mortgages (also called ARM) and hybrids you will find an option that works for you.

Final word: Don’t do anything you aren’t comfortable with. Trust your instincts and always read the fine print. If you are still confused, ask a trusted friend or family member to have a look and offer their opinion. You don’t have to make the decision alone.

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