Bad Credit Refinance - Is it Possible?

With the current state of the economy, many people wonder about bad credit refinance - is it possible? Is it even desirable? Here to help sort out fact from fiction are a few tips on the pros and cons about bad credit refinance.

Tips on Bad Credit Refinance

Fiction: It's impossible to refinance today because banks aren't lending.
Fact: Bad credit refinance is still possible even in a difficult economy. Just keep in mind, without good credit you may not qualify for the best rates. However, that doesn't mean you won't save money. Many people with bad credit still save money or reduce their monthly bills by refinancing.

Fiction: Refinancing always makes sense.
Fact: Not everyone benefits from refinancing; in fact, for some people it can cost much more to refinance rather than pay down the terms of the original loan. Always calculate the full cost of refinancing, including closing costs and fees, and not just the monthly savings.

Fiction: Bad credit refinance ends up costing more in closing costs and other fees than it is worth.
Fact: Shop around for the best terms and rates to find a loan that fits your needs. Many people find they are able to recoup the cost of refinancing the loan within 1-3 years or even less.

Fiction: Bad credit refinance isn't a good idea because the government might not be willing to help once funds become available.
Fact: Following the mortgage crisis of 2009, the government made special funding available. As of 2010, only a few hundred people have taken advantage of the HOPE loans and other government sponsored initiatives. Currently there isn't any way of knowing what qualifications and criteria will be necessary in order to obtain assistance at a later date; on the other hand, locking in a solid fixed interest rate today assures your financial obligation is stable no matter what takes place in the future.

Fiction: I will be required to pay a lot of money out of pocket in order to refinance my home.
Fact: It is often possible to refinance with little to no money out of pocket. Closing costs and other expenses are easily rolled into most loan packages making it as affordable as it is easy to start saving money almost immediately. Just keep in mind, while it is simple to roll expenses into the closing cost it isn't always desirable since you will be effectively financing them for the entire term of the loan. If you are able to pay for closing costs and other fees out of pocket it is often preferable to do so when doing a bad credit refinance.

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Home Refinance Advice

When it comes to a home refinance, things aren't always as easy as they may initially appear; learn how to protect yourself and get a great rate with this easy to use home refinance advice

Home Refinance Advice

1. Work with a solid lender. With the recent banking crisis it can be difficult to know which company is solid and which isn't. Take time to verify the credentials of the refinance lender and follow-up by making copies of all paperwork, communication and other transactions. In the event of a problem, you will have the information required to prove your position.
   
2. Don't fall for scams. Always verify the credentials of any home refinance provider prior to relating sensitive information including social security number, banking or credit scores. It's a good idea to check with the Better Business Bureau or other consumer regulatory agency in your state to confirm the agency is in good standing and eligible to write loans. Never do business with a company that requires large up-front fees to gain information or anyone that makes promises that sound too good to be true. Know what typical closing costs and other refinance fees will be before you sign.
   
3. Speak to a credit counselor. If you are interested in home refinance as a way to reduce monthly debt, it may be advisable to speak with a credit counselor first. Sometimes it is possible to restructure or modify current loans or debts to make them more affordable without having to refinance. Depending upon your specific situation, loan modifications, extended payment plans or other payment options may be less costly in the long run and provide the same relief for a fraction of the cost. Remember, the time to act is before you are in serious financial trouble. Plan ahead in order to keep all your options open and then make the best decision for your situation.
   
4. Get it in writing. Refinancing is a complex transaction where time is of the essence; everything from rate locks to points paid are subject to change so always be sure to get everything in writing. Never rely upon verbal approval only. In the event of a problem you will not have sufficient proof to substantiate your position.
   
5. Make copies of everything. You have probably heard the saying to err is human. Well, it certainly holds true when dealing with any type of paperwork. During the course of a mortgage or home refinance you will be required to submit many types of forms and documentation. Take a few extra minutes to make a copy of everything just in case it is needed later. Not only is it a great way to stay organized but it may help prevent the late submission of paperwork required to get the best rate.

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