Homeowners Refinancing With Low Credit Scores

Refinancing With Low Credit Scores

Gustan Cho Associates

Homeowners thinking of refinancing with low credit scores their current home loans need to be aware that mortgage rates are determined by credit scores.  The higher you credit scores are the lower your mortgage rates. Refinancing with low credit scores can be done but homeowners thinking about refinancing with low credit scores should carefully examine maybe waiting until they can improve and maximize their credit scores before they start the refinancing process. Minimum credit scores required to qualify for FHA Loans are 580 FICO and minimum credit scores required for Conventional Loans is 620 FICO. Homeowners refinancing with low credit scores need to see if they can maximize their credit scores so they can qualify for the lowest available credit scores possible.

Consult With A Mortgage Consultant

Consulting with a licensed mortgage loan consultant does not cost a homeowner anything.  If you run into a mortgage lender that asks you an upfront fee to run your credit report, go somewhere else.  A mortgage loan consultant should not charge you anything upfront.  It will just take a few minutes for a licensed mortgage loan originator to run your credit.  A professional loan originator will go over your credit report with you and see if there is room for you to improve and increase your credit scores.  Your mortgage loan originator will go over mortgage rates with you with the current credit scores you have and your mortgage rates if you can get your credit scores improved.  To get the best mortgage rates, your credit scores should be at 740 FICO or higher.

Ways Of Improving Your Credit Scores

There are some quick tips on maximizing your credit scores easily and quickly.  Just paying down your credit cards can quickly improve your credit scores.  The way this works is if you have high credit card balances, the credit reporting agencies will lower your credit scores.  Many of my refinance borrowers are asked to pay off their credit card balances and sometimes they see a 100 point jump in their credit scores.

Another way of improving your credit scores is by adding more new credit.  For homeowners looking into refinancing with low credit scores, they need to see the reason for the low credit scores. Many homeowners may not have enough credit or no credit. Some homeowners have closed out their active credit accounts so they have no active credit tradelines.  Have no credit, little credit, and no active credit tradelines will hurt the consumer’s credit scores.  Adding new credit such as opening up several secured credit cards can improve credit scores.  Three to five secured credit cards with $500 credit limit on each secured credit cards is strongly recommended.

Errors On Your Credit Report

Homeowners seeking refinancing with low credit scores should carefully review their credit report and see if there are no errors on their credit report.  Credit Reporting Agencies often report errors on consumer’s credit reports which affects the consumer’s credit scores.  One derogatory error on one’s credit report can mean a major drop of their credit scores.  A 30 to 40 point decrease in credit scores can mean a 0.25% difference in mortgage rates which translates into tens of thousands of dollars worth of mortgage interest expense over the term of the loan.

Refinancing Costs Money

Refinancing with low credit scores may save you money now but if you had higher credit scores, it would have saved you more money.  There are closing costs everytime you refinance a home loan.  Many mortgage companies advertise that there are no closing costs.  There is no such thing.  You may not have to pay any closing costs but there are closing costs with every refinance mortgage loan.  One thing homeowners do not understand is that the closing costs is built in to the rate.  When refinancing with low credit scores, weigh your options whether it makes sense to wait a few months to see if you can improve your credit and credit scores so you can get the best available mortgage rates and you do not have to refinance your home loan again after your credit improves at a later date.

Related> Mortgage Rates And Credit Scores

Related> Secured Credit Cards To Improve Your Credit Scores

Related> Credit Inquiries Will Hurt Your Credit Scores

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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