Bad Credit? How to Shop for the Best Mortgage

Just because you have bad credit doesn't mean you can't check with different lenders and negotiate the best possible deal. What's the best way to get a decent rate on a bad credit mortgage refinance? Shop around!

Comparing loan options with different lenders doesn't have to be a chore. Getting your home loan refinance can actually be easier than you think. Despite your bad credit, you have a variety of options and there are plenty of lenders willing to work with you. Knowing what questions to ask before you get started will make the task go smoothly and help you get the best possible deal.

Questions to Ask When Shopping for a Mortgage RefinanceSome of the top questions you should ask as you negotiate your bad credit mortgage refinance are:

* Can any of the closing costs or fees be waived or negotiated?
* Is there a prepayment penalty? If so, how much, and is there an option without the penalty?
* Are extra principal payments allowed?
* Is there a lock-in agreement in writing? Hint: a lock-in is a written guarantee that you will be paying a specific interest rate providing the loan is closed within a certain time period. The lock-in gives you the rate, but check your Good Faith Estimate and Truth in Lending to be sure of what the charges for that rate will be at closing.
* If the rate drops before the loan closes, can you lock-in the lower rate? This is called a float-down.

Shopping for a bad credit home loan refinance involves asking questions, getting the details in writing, and making sure the documents agree with what you have been told. The interest rate, APR, and closing costs should all be disclosed on a Good Faith Estimate and Truth-in-lending disclosure form. The lock-in agreement should say what the rate is and how long it is locked in.

Make sure you compare the same loan amount, terms, and type of loan between different lenders. Shopping around will give you the best chance to get a good deal, so prepare your questions in advance and keep all the paperwork. You might find you actually enjoy it, too, once you understand the process.

Beware of Bad Credit Refinancing Scams

Have I got a deal for you! There's this bridge. It spans the East River, connecting Brooklyn and Manhattan. True, it's an old bridge, opened for service on May 24, 1883. But that's why I can offer it to you at an amazing low price…if you act now! If this sounds good, you may be a prime sucker for advance-fee loan sharks that prey on people seeking bad credit mortgage refinances. Read on: there are ways to arm against bad credit lending thugs.

Don't be offended, it's easy to become one of the many unwary poor credit borrowers who, feeling ashamed or desperate, grab hold of what looks like an attractive come-on from fraudulent lenders who promise speedy mortgage refinance relief from your misery. Their ploy is to ask for an advance fee on your bad credit refinance application, stating that the payment will dramatically improve -- if not flat-out guarantee -- your odds of getting a low interest poor credit loan.

If It Has Fins, It's a Bad Credit Loan Shark

There's a way to make a critical distinction between a genuine bad credit lender and a scam artist reputedly offering poor credit mortgage refinance packages. First off, a legitimate lender will respond to your questions for information -- a scam artist will pester the dickens out of you, usually out of the blue. A legitimate bad credit refinance lender may in fact ask for application and processing fees, but these will come out of your loan itself following approval, not in advance from your pocket. If a lender sends you a firm offer without direct personal contact, raise the hurricane flag. Remember, no legitimate poor credit refinancing lender will claim that your loan is guaranteed before they process an application, check your credit, and your income-debt information. Take your time, be wary, and evaluate several companies before moving ahead.

The Seven Habits of Highly Successful Bad Credit Refinancing Candidates

With mortgage rates still relatively low, even homeowners with bad credit stand to benefit from refinancing. If you want to take advantage of this opportunity, you'll need to know how to get the right loan refinance in the least amount of time. Here's how to get your loan file to the top of the lender's stack.

1- Know how refinancing fits into your financial goals. This is the single most important factor in getting the refinance that's best for you. Do you want to get cash for home improvements? Do you want to replace your bad credit mortgage with a traditional refinance, landing a better rate?

2 - Have all the paperwork ready to go. Make sure you make the most of that coveted loan appointment by arriving with bank statements, pay stubs, tax returns, even hazard insurance documents.

3 - Do the Math. How long will it take to recoup the closing costs of the refinance from your monthly savings? Determine when you will break even, and only refinance if you know you'll stay in the house at least that long.

4 - Know thy credit. There are plenty of refinancing options for good and bad credit borrowers alike, but not everyone will qualify for the rock-bottom rate advertised. Set your expectations by reviewing your credit report.

5 - Include a savings cushion. Save some of that cash-out refinance for a rainy day. Roof repairs, pest control, you never know what household expenses will come up.

6 - Lock rates for as long as possible. In today's booming refinance market, it can take sixty days to close. Lock in low rates for at least that time, if not longer.

7 - Ask for regular progress reports. Get a timeline from your lender, and then follow up to make sure the ball keeps rolling.

Bad credit or good, everyone stands to benefit from today's low-interest mortgage refinance market. If you arrive with a solid game plan, you can be sure you walk away with the mortgage refinance that's best for you.

5 Mistakes to Avoid if You Have Bad Credit and Want a Mortgage Refinance

If you are one of the many Americans out there with bad credit, but want a mortgage refinance, you are probably scrutinizing your credit report and wondering what you can do to improve your situation and boost your credit. Sometimes it helps to know what not to do so that you don't make things worse.

First of all, if you have bad credit and are looking to refinance your mortgage, make sure that you've really evaluated your motives and understand whether or not getting a bad credit refinance mortgage will improve your situation. If it will make things worse in the long run then perhaps you need to reevaluate whether a bad credit home loan refinance is really the best thing for you. With that being said, here is a list of things you should avoid doing when looking at a bad credit refinance:


* Don't apply for a loan without first checking your credit report. There may be mistakes or old items that you can clear up to improve your score.

* Don't miss any payments on your current debts. Lenders want to see that you've been current on your mortgage and all other bills.

* Don't open new lines of credit. You don't want to add to your debt-to-income ratio and you don't want to over extend yourself.

* Don't pay off all your existing credit cards. Paying them off can send the wrong message to potential lenders and make matters worse.

* Don't pay off old collection accounts right away. Paying off an old account can bring it to the forefront of your credit report.

This list isn't arranged in order of importance. These are just important things to avoid when preparing to apply for a bad credit home loan refinance. To qualify for your bad credit mortgage refinance you want to do everything you can to make sure you qualify. Good luck.

Want to Refinance? Understand the Terms

Homeowners with bad credit sometimes feel overwhelmed during the mortgage refinance process. It doesn't take much to feel like you're in over your head if you don't understand the terms used in the mortgage business. This glossary should help.

Bad Credit Refinance: A Glossary of Mortgage Terms

Here is a brief explanation of some of the most commonly used mortgage terms:

* Adjustable Rate Mortgages (ARMs): This is a variable rate home loan based on a financial index--your payments go up or down as the rate fluctuates.

* Annual Percentage Rate (APR): This is the cost of your loan in a yearly interest rate. It includes the interest rate on your loan as well as the points or fees you might be paying.
Conventional Loans: Any home mortgage that isn't insured or guaranteed by a federal agency, such as the FHA.

* Escrow: When a home is bought or sold the money is given to a neutral third party, like an escrow company or sometimes a lawyer, who holds the money until all paperwork is completed and the transaction has closed.

* Fixed-rate Loans: A mortgage where the interest rate is fixed over the entire duration of the loan. These mortgages are usually offered in 15 or 30-year terms.

* Interest Rate: This is the rate charged by the lender for advancing you the money for your home loan. It is determined by rates in financial markets, your credit profile, and how good a deal you can negotiate with your mortgage lender.

* Loan Origination Fees: Fees charged by the lender or mortgage broker for the processing of the loan. These fees may be negotiable.

* Lock-in: This is a written agreement guaranteeing a specific interest rate or terms on a loan providing it is closed within a certain timeframe, such as 30 or 60 days. Some loans offer a "float down" which means that if rates go lower than what you've locked in you still get the lower rate.

* Points: These are fees the lenders charges for the loan and are included in the closing costs. One point equals one percentage of the loan amount.

* Private Mortgage Insurance: PMI is usually required when you are borrowing more than 80% of the value of the home.

Is Now the Right Time to Refinance?

The National Association of Realtors predicts a national price drop this year -- could now be the right time to refinance? The answer depends on where you are.

A Flat Year

While the National Association of Realtors predicts a national price drop in 2007, it admits that the numbers are slightly distorted as sales are shifting from high-cost housing markets to more moderately priced regions. However, the overall prognosis is that home prices will essentially flatline this year. For those of you keeping an eye on your equity and wanting to refinance, this means that you should thoroughly research prices in your area before you make a move.

Bad Credit Mortgages: To Refinance or Not To Refinance

This year has so far been marked by upheaval in the mortgage market. With some subprime lenders facing financial troubles, borrowers with bad credit are likely to face fewer refinance options than they did just a few months ago. This means more shopping around to get a good deal. It also means that you need to know your local real estate market before you decide to refinance. If prices are falling in your area and you refinance you could find that your home is worth less than you owe.

Rising and Falling

CNNMoney.com recently reported on the top and bottom five housing markets across the country as forecast by Fiserv Lending. Among the 100 largest housing markets in the U.S. McAllen, TX is slated to have the best growth with a 9.8% increase in prices over the next year. The bottom? Las Vegas, NV is forecast to have the greatest price drop between now and April 2008 at -8.9%. How does your real estate market look?

Consider the Future

As you start investigating your mortgage refinance options consult with local resources such as your real estate agent and your mortgage banker to find out what's going on in your neighborhood. If prices are on the rise then now could be the perfect time for you to refinance your home.

Bad-Credit Mortgage Refinance

If you have bad credit, you will quickly learn that you have fewer options when it comes to a mortgage refinance than borrowers with high credit scores: You may not be able to borrow as much because lenders will require a lower loan-to-value ratio. This combined with rising closing costs can force the amount you can borrow down.

Refinance Your Mortgage:

The Impact of Bad CreditGetting a mortgage refinance means replacing your current home loan with a new one. For bad-credit borrowers, it is vital to know what closing costs to expect — you may need to have cash on hand in order to close the loan.When you refinance your mortgage there are a number of closing costs you can expect to pay:

* Origination fees, and possibly points
* Credit report
* Title search
* Title insurance
* Appraisal fee
* Application, underwriting, or document preparation fees

Avoid Surprises:

The Cost of ClosingYou can get a rough estimate of closing costs when you shop for a mortgage refinance. Lender requirements will vary, as will interest rats and points charged. Your financial situation will largely determine these figures. Even if you refinance with your current mortgage lender you can expect to pay some fees at closing. When you apply for your mortgage refinance, lenders are required to furnish a good-faith estimate (GFE) of closing costs and a truth-in-lending (TIL) disclosure. Ask if you can finance the closing costs with the home loan, though beware of higher interest rates as a result. Shop with multiple lenders, online or in person, to get the best refinancing deal.