Your Questions About Mortgage Refinancing With Bad Credit

Charles asks…

Would a mortgage company refinance one of it’s mortgage customers that has bad credit?

Current APR 6.375
Would like to refinance around 5% APR

With lates and a few charge offs from 5 years ago, would a mortgage company do a refi for one of it’s existing mortgage loan customers that has a weak credit score?

John answers:

Not likely. You would think it makes sense because you are more likely to meet a lower payment. However, the way mortgages are financed makes this a terrible deal for the bank. They cannot sell your new loan when the borrower has poor credit.

Michael asks…

Is it possible to refinance a mortgage with bad credit?

A few years ago my husband and I bought our home under a really crappy plan. We have a fixed rate for so long and then it will go adjustable. I didn’t find this out until a week before closing. At that time it felt like it was too late to turn back.

Well our rate will go adjustable in March of ’09. 2008 has been the year from hell for our family as far as finances are concerned. Our mortgage payment has been late and reported to credit more than once already and it probably won’t get better for at least three more months.

So what are our chances of refinancing? I think they are nil, but would like your opinion anyway.

John answers:

You can’t refinance with another bank, but you can speak with your lender and explain your situation.Keep asking them to change your rate, because you can’t afford your recent payment. They will try to help you, just get to the person in a bank, who will willing to help you. People getting today not only the rate cut, mortgages getting cut by 30%. Keep trying. Good Luck.

Maria asks…

how to refinance a mortgage with bad credit?

my mortgage co wont help me (gmac) i dont have good credit at all..i have had a few late payments..just had a baby..i dont get paid that much and my husbands work is slow.. i just want to refi!! no cash out..house is worth approx 70K owe about 65K and dont want to pay for a loan modification cuz if i had the money to do that i would be on here asking for suggestions.. oh i dont want any smart a** answers you can keep them to yourself! i just need honest answers from honest people! thank you
would i just be better off to let them foreclose on it..rent until its off my credit and start fresh in a few yrs?

John answers:

Hello, don’t despair. There are millions in the same situation.

Before you decide to foreclose, what’s the market rate rent in your neighborhood? If it’s significantly cheaper than your current mortgage plus property taxes, I can understand why it would sound appealing. However, you should try these 2 things before you go that route.

First, forget about refinancing. GMAC (or any other lender) will NOT refinance you with recent mortgage lates, bad credit and low income. There are recent programs (such as with B of A) that will allow people under water to refinance at very good rates but GMAC doesn’t participate in that program.

Your options are:

1. Call GMAC for loan modification. Tell them your current situation, honest income and expenses and they’ll let you know if you qualify. It takes months but it’s worth the effort. I’ve done it with WAMU/CHASE. My friends/clients have done it themselves and lowered their payments and kept their homes. Now, if your debt to income ratio is waaaaay off the chart and they see that there’s no way you can really afford even a lowered payment, they’ll deny you

2. If they deny you, try short sale. That’s much better on your credit than a foreclosure. With foreclosure and shortsale, whatever amount the bank loses on that transaction, you’ll get a 1099 at the end of the year which you’ll have to pay taxes on. It counts almost as income that you have to pay the IRS. The only way to avoid that is through a BK. Remember, with foreclosure, you can’t buy a home for 3 years even with FHA.

Of course the last option is a BK. Unless you HAVE to, don’t do it. It’s expensive, first of all and kills your credit. However, if you have to, then, you have to. It’s not the end of the world.

Either way, you have to think of yourself and the family. Hold onto every dollar you have. Don’t pay anyone to try the modification. Do it yourself. I did it myself and it was easy, just time consuming. Be prepared to follow up constantly but it’s worth it.

Nancy asks…

Is there such a loan mortgage to refinance a home with people with bad credit?

intrest rate went up but having difficulty making payments and lowering my credit score

John answers:

It may be too late if you have missed mortgage payments already but find an FHA Lender for a refi. The FHA program is back in favor now that people are in ARM’s that are about to explode on them.

There are still plenty of Subprime Lenders who refi on bad credit but if you can go FHA, that will get you into a 30 year fixed with a very good rate. Yes, you will have to pay PMI, but it will likely be worth it depending on what your payments will adjust to.

Best wishes!

Me2Me2Me3@yahoo.com

Laura asks…

Should I cosign a refinanced mortgage with father in law when I have bad credit?

We live in CA. I live with my father in law and we are in need to apply for refinance w/ cash out. However, he is retired, has excellent credit, but only makes about $50k a year with combined pensions and social security. The bank was only willing to give him $350k and we actually need $390k. They said the only way they’d allow him the $390k is if I cosign. I have terrible terrible credit (a couple of car repos, late payments, behind on taxes, etc…). The bank told him they would just really like my income there (I make $60k a year), but I’m afraid if I cosign for him, it would only hurt his chances for a loan. By the way the house is worth about $550k in the current market.

Thanks for your feedback.
We live in CA. I live with my father in law and we are in need to apply for refinance w/ cash out. However, he is retired, has excellent credit, but only makes about $50k a year with combined pensions and social security. The bank was only willing to give him $350k and we actually need $390k. They said the only way they’d allow him the $390k is if I cosign. I have terrible terrible credit (a couple of car repos, late payments, behind on taxes, etc…). The bank told him they would just really like my income there (I make $60k a year), but I’m afraid if I cosign for him, it would only hurt his chances for a loan. By the way the house is worth about $550k in the current market.

Thanks for your feedback

eta: Thanks for the replies. Another question. I really don’t want to explain my situation to him unless I really need to. Can the bank(s) discuss my information with him without my consent?

John answers:

Did anyone actually read this question?

They are looking for a refinance with cash bank not a purchase so down payment is not even a factor.

Since you have bad credit the bank will not be able to make a decision on the loan until you actually apply and since you father in-law has already been turned down you have nothing to lose.

Now one of the other posters did point out something you have to take into consideration, if your name is going to be on the title and you have creditors coming after you for the repossessions or back taxes they can take you to court, get a judgment and file a lien on the home.

They can’t take it but they can force you to pay them back out of any profits if you sell it.

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