Although buying a home remains one of the most important pillars of American Dream, for many homeowners, a mortgage can feel like a strong anchor.
The interest rates have remained steady at historic lows for the past few years, making it more appealing for homeowners to refinance higher-rate mortgages.
Refinances can reduce your monthly mortgage payments. This is especially true if you are “house poor”, meaning that too much of your income goes towards housing costs.
Refinances can be a little more difficult for homeowners who have less than perfect credit scores. If you have a mortgage that you are struggling to pay, being “house poor” will only make the problem worse. There are options for homeowners with low credit scores to refinance.
What does it really mean to be “house poor”?
If you have a mortgage that requires a large portion of your household income, then you might be “house poor” or ” cash rich.”
To be considered house-poor, there is no set threshold.
This is because a large proportion of your income goes towards housing costs, such as maintenance, mortgage, homeowner’s association fees, and property taxes. You have very little money left to pay for other financial obligations and to save for emergency situations.
This could put you in a dangerous financial situation. You could lose your home or miss other bills if your income changes.
For homeowners with bad credit, there are a variety of refinance options.
If you are applying for a conventional refinance, your credit score should be at least 620. Refinance programs may accept borrowers with lower credit scores.
Beverly Hills Mortgage Brokers might also review your income and liquid cash reserves in order to determine if you are able to address financial emergencies.
This lowers the lender’s risk as mortgage debt may be discharged during a Chapter 7 bankruptcy. Your Beverly Hills Mortgage Broker might be more inclined to approve your refinance if you have steady income and liquid savings.
Refinance your mortgage? Explore all your options
These could also include
- Before applying for a refinance, improve your credit score.
- For refinancing options, speak to your lender.
- Look for better deals or another lender that offers refinancing to bad credit.
- You can find a friend or family member with good credit who is willing to cosign the loan.
- If you have an FHA loan, you can use a streamline refinance.
Each homeowner will have their own needs so make sure to explore all the options.
Credit score improvement
Your top priority should be to improve your credit score. If you are house poor, this may make it difficult to reduce your debt. You may also miss other bills.
There are however ways to improve credit and refinance your mortgage.
- To help you pay your debts on-time, consider taking on extra work.
- Your discretionary funds can be used to pay off your credit card debts. This is often the most significant impact on credit scores for homeowners.
- Keep your credit card balances low.
- Your unused credit card accounts should be kept open. Closing credit cards accounts can reduce your credit score.
- Connect your cellphone and utility payments to Experian. This will allow you to include on-time utility payments in your credit score calculation.
- Examine your credit reports for any inaccuracies and make a complaint.
- Do not open credit cards or other lines. This will help you avoid difficult inquiries.
Even if your credit score is not in the “excellent” or “good” range, Beverly Hills Mortgage Broker may still be willing to lend you evidence that you are working towards improving your credit score. These documents can be used to help you negotiate a loan refinance.
Talk to your Beverly Hills mortgage broker
Your Beverly Hills Mortgage Brokers will often work in your best interests to help you keep your home. You won’t know if your lender is open to working with you unless you ask. First, contact your lender and explain your situation fully.
Beverly Hills Mortgage Brokers often have agents that can assess your financial situation and recommend possible options. Your lender may be willing to approve a lower interest rate with minimal hassle.
Look for a new lender
You may need to search for other lenders if your Beverly Hills Mortgage Broker refuses to work with you directly to refinance your loan.
Each Beverly Hills Mortgage Broker will have their own loan approval standards. Your unique financial profile combined with lower interest rates could lead to a lender being willing to purchase your existing mortgage at a lower rate.
You can also search around to find a Beverly Hills Mortgage broker who is more willing to assist individuals with bad or poor credit when refinancing their mortgage.
Co-sign your refinanced mortgage with a friend
Beverly Hills Mortgage Broker might be more open to refinances if there is a cosigner. Your co-signer should have good credit or excellent credit history and a steady income. The bank will hold the person responsible for paying the mortgage payments if you default on your mortgage.
You can do this if you are a spouse/committed partner, but it is not advisable to place another person’s financial well-being in danger if you are unable or unwilling to pay.
Refinance with an FHA streamline
You may be eligible for an FHA streamline mortgage refinance if you have an FHA-insured loan. The Beverly Hills Mortgage Broker might only require certain documents in order to streamline your refinance. A streamline refinance process is easier for homeowners with bad or poor credit and can have a greater chance of success.
Is refinancing a good idea for my credit?
Refinance of your home mortgage may cause a decline in credit scores. Refinance of a mortgage is a loan application. Any attempt to refinance your credit will result in a hard inquiry. Multiple refinance applications will increase the risk of this happening.
Unintentionally, you may lower your credit score by not paying off your old loan in time for the loan to be approved. Keep paying your old loan until you are told by your lender when you can stop.
Refinances are intended to lower your monthly payments and allow you to save money for other financial goals such as debt repayments and credit improvement. You may be able refinance your mortgage even if you have poor credit. This will help you work towards financial stability.