It is hard on those people that look to refinance a home mortgage, but can not get approved for a loan. If you have credit card or any other type of debts and have already been red tagged as a credit risk do your research before you by into any type of loan that promises the impossible. Not saying that there are not good loans available out there, but you must be careful before committing to any thing that sounds to good to be true. You must always protect yourself from being taken advantage of, make sure to do your research before choosing the company you want to work with. It may sound daunting looking for a refinancing lender but it is possible to find a good loan. If your looking to refinance your mortgage to try and get out of debt, here are five tips that will be helpful in avoiding getting into any more financial trouble.

1.)Look Around
Make sure to shop around! There are many lenders out there that will be more than willing to take advantage of you. Some lenders that target people with bad credit know that people are in a desperate need for loans, so the try to rush you into a loan that may not fit your situation or you don't feel comfortable with. Always compare different lenders so you make sure that you make the best choice. So make sure that before deciding on a refinancing lender you do your research and remember to be patient.

2.)Understand any FEES
Beware of multiple fees that you don't understand! You may see fees like express mail fee, processing fee, affiliate consulting fee or settlement fee, these fees are what they call “junk fees” these are fees that you should not have to pay. If you do have to pay them the lender should only charge you one single lump sum fee. Make sure you do not overlook and unnecessary fees.

3.) Sub-prime Interest Rates
Those people with bad credit and that are considered a credit risk are referred to as “sub-prime borrowers.” If the loan that the lenders are offering you is more than 2% higher than the prime rate you should not take that loan. Not sure what the prime rate should be? The most current prime rate is available online. If the interest rate is to high it won't help you get back on track, because the payment will be to high every month. Those with bad credit are a risk for lenders because they are more likely to fall behind or default on their payments, so their main concerned about getting their money back as fast as possible. Look out for those lenders that are only concerned about themselves and not you.

4.)Understand Your Contract
Remember that everything matters. Do not let the lenders decide everything for you. This is your money and your credit score that is at risk. If you pay back the loan to the lenders early you should not be charged a fee.

5.)Look Out for Bad Interest Rates
Some lenders may want to give you a loan with a Adjustable Rate Mortgages (ARM) or Interest-Only, DO NOT take this type of loan. When refinancing you must get a fixed rate home mortgage. If you decide to agree on an adjustable rate it will seem good now however it most certainly increase when you can least afford it. Make sure to lock in a fixed interest rate so you can not be surprised in the future.

So in the end it is possible to refinance and get a loan even with bad credit. You must do your research so you are not taken advantage of and you must be patient. Refinance and build up your credit score.

Subscribe via email

Enter your email address:

Delivered by FeedBurner