Seeing the Light in Bad Credit Home Mortgage Refinance Offerings

Mortgage Refinance When is Mal Apply the Credit

With the economic and financial crises, many were left homeless or fighting for their homes while incurring decreasing credit scores. However, with bad credit home mortgage refinance options, more citizens are able to see the light at the end of the tunnel. The advantages of this refinancing option are allowing more people to keep their homes and their families secure.

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One of the casualties of the massive financial crises that hit the nation is the homeowner. His salary might have been reduced; the cost of his mortgage ballooning because of tightening of available funds, and the cost of living is still rising. Thousands of homeowners have been affected already and for the unfortunate ones, the ultimate price of the crisis is foreclosure. Many homeowners are looking for a breathing spell from their financial situation and many are looking for bad credit home mortgage refinance as an option. What exactly is this instrument and what can a homeowner get from it.

A mortgage refinance is acquiring a second loan in order to pay off the first loan used to purchase a house. The purpose of refinancing is to change the terms of payment, maybe lower interest rate or a shorter payment scheme.

One usually opts for a mortgage refinance when on the balance; the money saved on interest rate is greater than what is spent during refinancing.

A successful bad credit home mortgage refinance often gives you extra cash on top of being able to pay off you original loan. Usually, the terms of the second loan are much more manageable than what was given in the first. A mortgage refinance works by using the equity in your home plus the value of the asset to take a more friendly, second loan to pay off the first loan at the same time giving you some extra cash. 

The size of the refinancing depends a lot on your FICO score. If you always try to be a diligent payer of your other loans such as credit cards and bills such as phone charges and utilities, chances are your credit score although not as good, isn’t that bad either. Such credit rating means you are deemed a lower risk debtor. As such, applying for a bad credit home mortgage refinance could be easier than those having bad FICO scores.

However, with a low score, the bad credit home mortgage refinance package that you might get may not be so favorable. A typical condition before the refinance is availed is pre-payment penalties. Penalties may equal to six months worth of payments while some have been known to equal two to three years worth of penalties. When you could not negotiate for penalty free refinance, always try to get those with the lowest penalty. 

When you are facing this situation Computer Technology Articles, it might be a good idea to hire a consultant who is an expert on loans. His knowledge of the different companies that do mortgage refinance as well as his personal contacts might land you more favorable bad credit home refinance package.

Home Affordable Refinance Program

How To Start a Program Of Mortgage Refinancing

HARP 2.0 is the latest version of the home affordable refinance program. This program was created primarily to assist homeowners to refinance and take advantage of lower interest rates. It is most often for those who lost equity in their homes, but continued to make all their mortgage payments on time. To qualify for a HARP loan you must have no more than 1 30 day late payment in the last 12 months and the late payment cannot have been within the last 6 months. Also, you can only do one HARP refinance, so if you have already refinanced through the program before, you cannot do it again.The home affordable refinance program continues to change and hopefully when the next revision comes out (HARP 3) there will be opportunities to refinance for even more homeowners.

As of today's date, which is 6/7/2014, there are lenders who will lend up to 175% of your market value on a first mortgage. Any 2nd mortgage financing must be resubordinated, and with HARP 2 there is no upper limit on the combined loan to value. (CLTV-your combined loans to value) The second mortgage holder must agree to the refinancing and usually this is not a problem since by lowering your rate and monthly payment on your first mortgage, you are making their loan more secure. For a secondary home, it is possible to do a HARP loan however the loan to value is restricted to 125% LTV, and it is restricted to 105% on an investment property.

There are two programs for HARP, and both of them require that your loan is backed by either Fannie Mae or Freddie Mac prior to 6/1/2009. While your loan payments are usually sent to a loan servicer, it is still possible that your loan is backed by one of the two agencies. The way to find out is to search both agency databases. 

The majority of loans originated prior to 6-1-09 wound up at Fannie Mae, so it's usually best to check this database first. Both agencies have lookup tools where you can input your property address information and find out if a match is found. These two lookup tools may be found on the Pacific West Capital website on the HARP loans page.

The Fannie Mae program has more lenient guidelines as far as the LTV is concerned. The Freddie Mac Open Access program is usually capped at a maximum of 125% LTV with no upper limit for seconday financing. The interest rates on both programs are comparable to a regular refinance program with a conventional lender. In case you do have secondary financing on your home, under current HARP guidelines, it is not possible to combine your 2 loans together. This may change one day but for now this is how it works. Your existing 2nd mortgage must be resubordinated to the new first mortgage.

Another advantage is the flexibility with mortgage insurance. If you qualify for a HARP loan and your current loan does not have mortgage insurance on it, (MI) you will not be required to have any MI on the new loan regardless of your LTV. Typically any loan over 80% of market value will require MI. If you put down 20% or more when you bought your home, and your home value decreased putting your LTV above 80% Computer Technology Articles, you will not be required to have MI on the new loan since your current loan does not have MI on it.