Bad Credit Refinance
Exactly what is a “Bad Credit Refinance”?
Now this is not an official definition, but I’ll give it a go. A bad credit refinance is one in which an individual’s credit score and/or derogatory items listed on their credit report result in non-qualification for a prime conventional mortgage. In other words, you have to apply for a subprime refinance or an FHA home loan. The worst-case scenario is when the individual does not qualify for any refinance program available.
In recent years, most with bad credit would eventually refinance with a subprime lender and end up paying up to 3% and more in interest rate as opposed to the same loan scenario qualified with excellent credit. Yes there was a huge difference in refinance rates between bad credit subprime and excellent credit conventional home loans.
Those keeping up with the mortgage market, now understand that subprime lenders are pretty much a thing of the past and FHA has stepped in to fill the void. The important difference is that FHA home loans offer a distinct advantage over subprime mortgages in that they offer excellent refinance rates (comparable to excellent credit conventional interest rates) coupled with a high Loan-to-Value limit of 97% of the borrowers appraised home value.
So tell me, what is a bad credit refinance?
Again, this is not an official definition, but generally those individuals that have credit scores below a 620 FICO fall into the “bad credit” refinance scenario. In fact, those with credit scores between 620-700 and/or those financing most of the equity in their home would be advised to get an FHA home loan quote in addition to a conventional mortgage program quote to choose the best option for them.
FHA home loans are not credit score driven, but most underwriting investors will require a minimum of a 580 credit score to qualify. Also, no mortgage late payments in the previous 12 months will be allowed.
Those with credit scores below 580 will have a much more difficult time qualifying for a competitive refinance home loan. Today, it is mostly “hard money” lenders that cater to this crowd, and charge a major premium in interest rate for the privilege. An alternative to going “hard money” is to contact a reputable credit restoration company to improve your credit score within FHA range. The few hundred dollars spent on credit restoration with result in multiple thousands in principle and interest savings with a FHA refinance as opposed to a “hard money” home loan.
May the Mortgage Rates be with You!
Refinance Tool Box
Now this is not an official definition, but I’ll give it a go. A bad credit refinance is one in which an individual’s credit score and/or derogatory items listed on their credit report result in non-qualification for a prime conventional mortgage. In other words, you have to apply for a subprime refinance or an FHA home loan. The worst-case scenario is when the individual does not qualify for any refinance program available.
In recent years, most with bad credit would eventually refinance with a subprime lender and end up paying up to 3% and more in interest rate as opposed to the same loan scenario qualified with excellent credit. Yes there was a huge difference in refinance rates between bad credit subprime and excellent credit conventional home loans.
Those keeping up with the mortgage market, now understand that subprime lenders are pretty much a thing of the past and FHA has stepped in to fill the void. The important difference is that FHA home loans offer a distinct advantage over subprime mortgages in that they offer excellent refinance rates (comparable to excellent credit conventional interest rates) coupled with a high Loan-to-Value limit of 97% of the borrowers appraised home value.
So tell me, what is a bad credit refinance?
Again, this is not an official definition, but generally those individuals that have credit scores below a 620 FICO fall into the “bad credit” refinance scenario. In fact, those with credit scores between 620-700 and/or those financing most of the equity in their home would be advised to get an FHA home loan quote in addition to a conventional mortgage program quote to choose the best option for them.
FHA home loans are not credit score driven, but most underwriting investors will require a minimum of a 580 credit score to qualify. Also, no mortgage late payments in the previous 12 months will be allowed.
Those with credit scores below 580 will have a much more difficult time qualifying for a competitive refinance home loan. Today, it is mostly “hard money” lenders that cater to this crowd, and charge a major premium in interest rate for the privilege. An alternative to going “hard money” is to contact a reputable credit restoration company to improve your credit score within FHA range. The few hundred dollars spent on credit restoration with result in multiple thousands in principle and interest savings with a FHA refinance as opposed to a “hard money” home loan.
May the Mortgage Rates be with You!
Refinance Tool Box
Labels: bad credit, business, credit scores, finance, money, mortgage rates, refinance
posted by Jim Bisnett at
11:46 AM
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