Poor Credit Home Refinance

The usual belief that good credit rating would be the basic eligibility for home refinance might not exactly be true. With the current economic situation with more and more people being unemployed or losing jobs resulting in the increase of defaulters there might be many credit unions and financial institutions which would willingly advance a home refinance loan. So in spite of a poor credit rating, one might find suitable creditors who might be willing to risk lending monies to people with poor credit rating. Having said that it might not be difficult to find creditors for a loan, it doesn't mean that very poor and extremely bad credit rating would qualify for a loan with such creditors. Hence before deciding to opt for mortgage refinance with bad credit it might be prudent to get a comprehensive grasp on one's finances and also the current credit rating from the three credit bureaus namely Equifax, Trans Union and Experian.

As with first mortgage, home refinance would also require the individual to qualify for a loan. Usually the documents that need to be processed might be fewer that those while availing a first mortgage. It might be best to bear in mind that one's home would be collateral for the refinance loan. The best places to approach for a refinance home loan in case of a bad credit rating would be sub-prime lenders as these lenders would be experienced in handling such loans. As home refinance may be treated as second mortgage, one's current financial situation and current credit scores would play a major role in determining the interest rate and terms and conditions of the loan that might be advanced.

It might be prudent to shop around for possible lenders for refinance home loan before zeroing down on one lender. This would help as one would be able to choose from the existing lenders and to compare the various interest rates, fees and terms for the loans that might be offered so that one might choose the loan that best fits one's needs and pocket. Generally, approaching the lender or bank that first advanced the first mortgage might be suggested since they hold the first mortgage and might be willing to advance a second loan in spite of the debtor's bad credit rating. However, it might be prudent to understand that any loan that might be sanctioned would be of a comparatively higher rate than what might have been had the credit rating been satisfactory or good.

However taking out a refinance loan might be a good solution to one's financial troubles and debt crisis. In spite of a comparatively higher interest rate payable on the refinance loan, the overall amount paid in terms of interest towards existing debt may be reduced as the loan availed may be used to consolidate the debts into one single monthly payment. There by the burden of multiple payments would be reduced and in the process cash may get freed up that might be saved or used for other much needed or unanticipated expenditure. In case one has decided to take out a home refinance loan then it might be better to start working to improve up on one's current credit rating for a period of a year or two before taking out a loan. It might help to adopt a life of budgeting and keeping the credit accounts active by making timely minimum amount payments along with seeking credit counseling to improve one's credit scores. Once the credit rating shows an improving trend, approaching lenders for refinance home loans might result in lower interest rates for the loans and may be better repayment terms. So, all is not lost with a poor credit rating. There is a silver lining to every dark cloud.

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Orignal From: Poor Credit Home Refinance