Refinancing your home loan could save you a ton of money over the life of a typical 30-year mortgage. Although refinancing your home loan would be more difficult when you have bad or so-so credit, you could certainly increase your chances of getting it done with these tips.
Do Not Expect to Get Extremely Low Rates
Mortgage lenders typically reserve or offer the lowest refinance deals to borrowers who have excellent credit ratings. The reasoning behind this is that these borrowers have proven themselves to be capable of getting their financials in order and are therefore less risky for lenders.
This doesn’t mean that you can’t secure yourself a nice affordable refi rate just because you have bad credit, a refinance specialist in Utah says. You just have to be more flexible and resourceful when shopping around.
You Might Have to Have Sufficient Home Equity
The main reason lenders usually avoid refinancing homes with insufficient equity is that the rate of a new mortgage is dependent on the home’s current market value. If there isn’t enough equity in your property for lenders to work with, you’ll be considered a risky borrower.
Look Into Government-Backed Refinance Programs
If you lack home equity, consider looking into refinance programs backed by the government. These include refinance loans offered by the HUD or Department of Housing and Urban Development and the FHA or Federal Housing Administration.
Make your Application As Irresistible As Possible
To try and negate your not-so-stellar credit, ensure that your application is as perfect as can be, most particularly if you’re looking to get a conventional mortgage refinance. Get all relevant paperwork together, including your paystubs and W-2 statements to show proper proof if your income.
Likewise, if you have a stable job and have been working for your employer for a long time, stress that in your application. Don’t forget to include bank statements that show you have ample cash reserves (if applicable) despite your bad credit.
Ultimately, if you’re able to present your refinance application in the best way possible and convince lenders that you’re not as risky as they might be thinking you are, you could indeed refinance your home loan, even if your credit is bad.