While aiming at refinancing your home with a low credit score can be tough due to the lenders’ mindset that you are a risky borrower, it is still possible to find the best rates to suit your situation. In fact, refinancing your home in some situations might save your credit score from future harm.
For example, in case you would like to shift from a mortgage that offers you an adjustable rate mortgage to one that offers a fixed rate mortgage due to an increase in interest rates. Here are three helpful tips from City Creek Mortgage, a top mortgage company St. George, that you ought to consider in such scenarios.
1. Gather all the necessary documentation
The main reason it might be challenging to access favorable mortgage refinancing rates while having a low credit score is the fact that lenders tend to consider both the credit score and income before offering a loan.
While your credit score might be low, you can still have an inviting income. As a result, ensure that you avail all the necessary documentation when applying (tax returns, pay stubs, financial statements, etc.), especially those that will act as your strong points.
2. Research on the amount of equity that you require
The amount of home equity that you should have before refinancing will typically vary from lender to lender.
When having a low credit score, however, fewer lenders will be willing to refinance your home in case your equity in the home is low. Conduct deep research on the amount of home equity you require before proceeding to approach the different lenders.
3. Decide the amount of interest that you are willing to pay
Other than the monthly installments, other costs will typically be associated with the refinancing deal, including the closing costs and borrowing fees. Therefore, it is mandatory that you land monthly mortgage payments that will suit your budget.
To be on the safe side, ensure that the interest rate that you choose to work with is lower than the future interest rates that you were to pay in your previous home financing option.
Bad credit should not make you give up on your refinancing goals. In fact, it should challenge you to rise from the ashes. Use the above tips and get land a great mortgage deal when having a low credit score.