Establishing or repairing bad credit can take some time and you must be patient. It may take up to a year if not more to fix or repair credit from bad to good. It all depends on how bad your current credit situation is. As you work on repairing your credit, your credit score will improve monthly as you pay your monthly payments on time, removing past due amounts and collection accounts.
If you have less than perfect credit, you are not alone. Many people have run into either income or credit problems and by making sure that you are in the right mortgage, you can put yoursel on the path back to a great credit rating.
Credit Problems
Credit problems are usually caused over an extended period of time where an individual or couple experienced financial difficulties that were out of their control. Late payments on credit cards, auto loans and/or other consumer debt can result in one or more accounts showing up with a derogatory mark on their credit report.
The right mortgage underwriting can take this into consideration. If a credit report shows good credit prior to the problem, and if there is an explanation for why credit will be good in the future, intelligent mortgage underwriting should provide a fair and reasonably priced home loan.
Income Problems
Income problems are often caused by misfortune. Illness, loss of a family member, lapse of employment, career loss; and/or self employment issues can produce a devastating effect on a person’s income, cash flow and credit. Usually, people that have experienced financial hardship as a result of income problems simply need a fresh start.
Extenuating circumstances, “outside of your control”, can be an explainable cause, and if there is a realistic expectation that the problems have been resolved, the right lenders will often provide a home loan with a reasonable and fair rate for the home owner; often regardless of prior income problems, or problem credit.
Refinancing Your Mortgage With Bad Credit
Having credit problems or income problems can make it difficult to get credit, but it will not be impossible to refinance your current home loan.
If you have bad credit and don’t qualify for an FHA program, your mortgage will come with higher interest rates and lender fees. However, even with higher rates and fees, refinancing your mortgage with bad credit may actually be able to help your current bad credit situation and still save you money on a monthly basis.
If you have multiple credit cards, car loans and other loans with high interest rates and monthly payments, it can benefit you to consolidate them into your mortgage. For example, a bad credit home loan mortgage debt refinance at 9% is still better than paying 21% on your credit cards. This can potentially save you hundred of dollars each month if not more.
With the lower monthly mortgage payments, you can take the “extra” money that you were used to paying on your mortgage and apply those dollars to pay down your credit cards which will help improve your payment history. As you continue to make your monthly payments, this will eventually lead to a better credit score and you will then be able to take advantage of lower interest rates in the future.
In the constant changing mortgage marketplace it is best to speak with a Home Loan Expert to find out the current available options to you.
