Bad Credit Mortgages

With very few exceptions, one of the first things a potential lender will ask you for when you are apply for a home loan is your permission to run a credit check. If you have some concerns about your credit history, you might want to think about what some people call "no credit check mortgages." There are lenders that specialize in helping people with bad credit get into their own homes and acquire financing at a reasonable interest rate.

Unless you are applying for a VA Home Loan Refinance, pretty much any legitimate lender is going to check your credit. However, your credit score is not the only consideration lenders will look at when you apply for a loan, and you should not think of it as the only determining factor. Some loan products are designed for people with a less than optimum, or sub prime, credit profile. Lenders who specialize in these types of loan products will weigh in other factors when considering your loan application. If you can provide verification of income (through W-2s, pay-stubs, and past years tax returns), and if you can provide personal references and documentation of your ability to meet your financial obligations, such as rent payments or deposit receipts, then you may be able to qualify for one of these types of loans.

Also, the fact that you are already a homeowner will weigh substantially in your favor when you approach a lender to refinance. As long as your Loan to Value Ratio (LTV) is high, the bank will take that into account when determining the risk of lending you money. It is likely that they will also look at the timeliness of the payments you have been making on your existing mortgage.

Your credit score is based on an average of the scores from the three major credit bureaus (TransUnion, Equifax, and Experian), and generally the middle score is the one used to determine your rating. When looking for a no credit check mortgage, shop around to as many lenders as you can and talk to loan officers to see what they recommend to improve your score and overall risk profile. You may not qualify for the same loan that a borrower with excellent credit could acquire, but many lenders will work with you to help you get a mortgage product that works for you.

If your credit is less than stellar, you probably already know that you will have a difficult time getting the best interest rates on a mortgage refinance. Here are a few things you should know about applying for bad credit refinancing.

First, your interest rates will typically be much higher than a person with a credit score of 680 or above. However, you should shop around and see what is available to you; depending on the current interest rate, you might be able to find some type of financing with a better rate than what you currently have. Investigate several lenders for the best rate. If you are a member of a credit union or can qualify to become one, be sure to check their rates because they tend to have better options for people looking for bad credit refinancing.

Secondly, check your current mortgage and make sure that you have no pre-payment penalties associated with refinancing.

Third, be sure you know what your credit score and Debt to Income Ratio (DTI) is before you go shopping for a loan. This will be helpful in presenting the best picture of your credit history to potential lenders.

The good news is that it is not impossible to refinance your home mortgage with bad credit. In fact, being a homeowner may actually help to raise your credit score from where it was before you purchased the property. Refinancing is a form of secured debt against your house, and if you are refinancing to consolidate some of your other outstanding loans, this may be in your favor. Even if you have other defaults on your record, refinancing to consolidate and pay that debt proves to lenders that you are dealing with your situation and know how to handle money.

Also, refinancing can be a way to consolidate your higher-interest credit cards, loans, and any other outstanding debts that you may have at a lower rate which will save you a substantial amount in interest and allowing you to make one payment a month instead of several.

If you have filed a Chapter 13 or Chapter 7 bankruptcy, the bad news is that this filing will remain on your record for seven to ten years. However, if you are a homeowner, the good news is that this does not necessarily mean you will be unable to refinance your mortgage for that entire time. It...