Yet For The Borrower With Bad Credit, Is Refinancing Really The Wise Choice

Category: Finance, Mortgages.

Interest rates today are still much lower than years ago. Yet for the borrower with bad credit, is refinancing really the wise choice?

We still hear that" now s the time to refinance" from friends and family. Read on the find out. If your credit has improved since you got your original loan, then refinancing might be in your best interest. Refinancing can often save you money over the long run, but if your credit has gotten worse since the time you obtained the loan, refinancing may not be the best idea. The key is to do the math on your own. In other words, asking a lender" is it a good idea for me to refinance? " won t always get you a straight answer. While most lenders are very helpful and have a vast base of knowledge in the financial world, they re still here to make a sale.

Weigh the difference between the rates you qualify for and the closing costs for the new loan, and make sure you re actually coming out ahead by refinancing. One little- known option is the FHA backed refinance. If you re in the condition where you need to refinance- Whether it s for a cash- out, or because of impending foreclosure- There are options that are available to bad credit borrowers. While many borrowers know that you can get an FHA loan to buy a house, not many know that the FHA also backs refinances. With an FHA loan, you can often get approved even with bad credit, reduce your down payment, and even get a better rate. Find a lender that works with FHA loans and discuss your options.

With an FHA backed refinance, instead of judging your application based on your FICO score, the FHA judges based on your credit history. This also gives you the chance to explain any blemishes on your credit report. In other words, they make their call based on your debt patterns over the last 12 months or more.