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.

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.