Refinance mortgage with bad credit- mistakes to avoid
If you are looking to refinance mortgage with bad credit , here are few basic mistakes that people make. If you read them it will put you well ahead of others and your refinance process would be successful. This is because many homeowners are not aware of the factors that influence their bad credit refinance. Many times refinancing does not pays itself and the costs and fees incurred do not make sense. Serial refinancing is an example where borrowers keep refinancing to higher mortgage amounts. As the mortgage industry has changed since 2008 during the Great recession the values of your home may been depressed in many parts of the country.
5 things you need to know before you refinance with bad credit
Taking your county assessor’s value as a basis for refinance.
That is the biggest mistake you can make.County assessed values on the tax bill are for county usage only. Lenders use the market values and the comparable data to value your home.The gap between the two can be substantial. Appraising the value of your home correctly means increasing the amount of loan you can qualify for. You need a qualified appraiser to do a proper job to bring about an exact value of your home.
Taking cash out of your home equity lines
Refinancing is subject to “seasoning” requirements if you have taken cash out recently (except for home improvement purposes) it may hurt your chances of refinancing. That is if you have refinanced in last six months and you want to cash out again, it may hurt your chances of another conventional refinance. Instead you can ask your lender to increase the amount of your line of credit. Here is howworks.
Taking a second mortgage out before refinancing the first
Lenders look at the combined loans and the value of your property even if you are refinancing your first loan. If the combined loan to value or CLTV is higher than allowed, your refinance may get turned down.Please ask before you take out a second mortgage. Again a proper appraisal may be a better solution.
Not providing the documentation promptly
During the refinancing process timely documentation is crucial.Your rate lock can expire or that great loan will pass you by. Therefore paperwork provided in a timely manner can make the loan come through.Time gets of essence here.
Putting Cash into the property
Since 2006 the values have dropped and appraisals have become harder to come at desired values. The lender often want to lower your rates but asks you to put certain amount of cash towards the bad credit refinance. That in our opinion is simply not an acceptable situation. Just walk away. Because you are losing your hard earned cash into a property that may even go lower in value.
Refinancing a mortgage with bad credit has its own pitfalls and in this economic times all ducks should be in the row to achieve the optimal results.
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