Mortgage Refinancing

Bad Credit Mortgage Refinancing

Yes, there are legitimate lenders out there who will still make loans to people with bad credit. Usually, they will only do that if your recent credit history shows a clean record and you can document how you are continuing to work to clean up your credit report and correct the negatives from the past.

Undoubtedly, the loan will cost you more than it might if you had a perfect credit score but that's probably a relatively small price to pay to obtain refinancing on an ARM that is headed for the adjustment period.  There are lenders who will entertain refinancing such a loan despite the recent tightening of credit.  If the original lender is a local institution and is still lending funds , your best approach is to talk to a loan officer informally about the possibility. Again, such an institution may not have the lowest advertised rates or associated costs but you may find the process a lot easier particularly if you have maintained a good payment record with the institution and have discharged all your other current debts on time. 

If that lender is not interested in making a bid for the refinancing then you will have to try the wider marketplace and investigate what is currently available.  The current rash of lender advertising may not be representative of what is really available to you as a borrower with a bad credit history.

When you investigate competing lenders, make sure that you do ask for all the "hidden" costs of the refinancing.  many advertisers offer low or no cost refinancing funds and then deduct various fees and charges from the balance..  Some of these facts may be difficult to elucidate, especially by telephone or in eMail so the final draft of the closing document must be examined closely to ensure that you are fully aware of the final costs involved.

When you have comparative figures available to you on refinancing your ARM either to a new ARM or a fixed rate loan , compare the costs of each.  not only the monthly cost involved in each of the possibilities but also the fees and charges that will be made at closing. Comparative mortgage calculators are available for no charge at BankRate and other online sites.

One aspect that should be mentioned here is that some ARM's written have a prepayment penalty, which requires you to pay substantial prepayment penalties if the refinancing occurs in the first few years. Such penalties are common with so-called option adjustable-rate mortgages, which typically carry a low teaser rate at the beginning of the loan which then rises sharply at the end of an introductory period.   In that case, you have to look at the economics of refinancing versus not taking in to account the penalty amount.  I hope that's not your case.