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Refinancing With Low Credit Scores And Bad Credit

Gustan Cho Associates are mortgage brokers licensed in 48 states

This BLOG On Refinancing With Low Credit Scores And Bad Credit Was UPDATED And PUBLISHED On November 6th, 2019

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 the credit scores are the lower the 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
  • Minimum credit scores required for Conventional Loans is 620
  • 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

There are other reasons why homeowners need refinancing with low credit scores. They may need to take out a co-borrower. Homeowners going through a divorce often need to refinance to take out the ex-spouse off the loan. In this article, we will cover and discuss refinancing with low credit scores and bad credit.

Consult With A Mortgage ConsultantHow Consult With A Mortgage Consultant

Consulting with a licensed mortgage loan consultant does not cost a homeowner anything.

  • If mortgage lender that asks an upfront fee to run credit report, go somewhere else
  • A mortgage loan consultant should not charge anything upfront with the exception of a home appraisal
  • It will just take a few minutes for a licensed mortgage loan originator to run credit
  • A professional loan originator will go over credit report and see if there is room to improve and increase credit scores
  • Loan originator will go over mortgage rates with borrowers with the current credit scores
  • They will go over mortgage rates and see if credit scores can be improved

To get the best mortgage rates, credit scores should be at 740 or higher.

Ways Of Improving Credit Scores

There are some quick tips on maximizing credit scores easily and quickly.

By paying down credit card balances to 10% or less utilization ratio, they can get a 100 point boost in their credit scores.

How To Improve Credit Scores To Get Lower Mortgage RatesHow To Improve Credit Scores To Get Lower Mortgage Rates

Another way of improving credit scores is by adding more new credit.

  • For homeowners refinancing with low credit scores, they need to see the reason why they have 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
  • Having no credit, little credit, and no active credit tradelines will hurt consumer 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 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 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

This translates into tens of thousands of dollars worth of mortgage interest expense over the term of the loan.

Refinancing Costs MoneyHow much is Refinancing Money

Homeowners with alternative financing can do refinancing with low credit scores and may save money. But with higher credit scores, it would have saved you more money.

  • There are closing costs every time homeowners refinance a home loan
  • Many mortgage companies advertise that there are no closing costs
  • There is no such thing
  • Borrowers 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 options whether it makes sense to wait a few months to see if you can improve credit and credit scores
  • This way you can get the best available mortgage rates

Do not have to refinance home loan again after credit improves at a later date.