Steps to refinance a mortgage with bad credit
Although you may have a few black marks on your credit report, it is still possible to refinance your mortgage. Many lenders are willing to work with borrowers who have bad credit, especially if they're already homeowners. Here are the steps you should take:
- Check your credit report.
- Talk to your current mortgage lender.
- Search online for a new lender.
- Be prepared to pay a little more.
- Take some time. If all else fails, you may want to wait another six months or a year before applying to refinance your mortgage. During that time, take extra care to make on-time payments to your creditors so you can improve your credit score and possibly qualify for a better loan.
It's possible that some of your bad credit is actually due to errors or mistakes! Get a copy of your credit report and review it carefully. Is all the information accurate? Are your balances, account numbers and payment information correct? If you see any type of error, contact the credit reporting bureau and the creditor immediately to get the information changed on your report.
If you're a good customer and usually make on-time payments, your current mortgage lender may be more lenient when you refinance because of your positive payment history. Ask about the types of refinancing available, and see if they are willing to work with you now.
If your current lender is unwilling to refinance your loan, do an Internet search for "bad credit mortgage" or "bad credit loans" to find a lender that specializes in these types of loans. Chances are you'll find lots of loan companies that can help you get approved for a refinance. Also look for help from independent mortgage brokers, they have many lenders available and can sort through many offers at once for you.
Bad credit means you're a bigger risk to the lender--and they will pass along that risk to you by charging you more. It's possible you'll have to accept a higher interest rate, or you may have to pay higher fees and extra charges.
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