Remortgage With Bad Credit

Getting a remortgage with bad credit may seem like an impossible task in today’s economy but there are a few things you can do to assure you will get your property remortgaged and help you rebuild your credit at the same time. 

The very first thing you should do is get copies of your credit report from all three credit bureaus and review the report for inaccuracies and incorrect information.  If you come across discrepancies in your credit report you will need to try and make the corrections.  Report the discrepancies to the credit bureaus first and ask that they investigate and remove the negative postings. 

Credit repair companies suggest that you report every negative mark on your report even if it is accurate.  Creditors have a certain amount of time to investigate and get back to the credit bureaus; if they do not report back in time then the negatives need to be removed.  If they come back as accurate, it is suggested that you report it again as not coinciding with your records. Often times the creditor will see this as a duplicate request and ignore it. This benefits you because if they do not report back to the credit bureaus then the negative mark must be removed.

The next thing you should do is take a credit counseling course to determine where and how you went wrong in the first place. You may also want to take a course on budgeting household finances so that you do not repeat your past credit behavior.

Should you try to refinance or remortgage your loan or should you try to get a modification to your existing loan?  Well that really depends on how poor your credit is and the reasons why you want to remortgage.  Since interest rates are tied to your credit score, the lower your score the higher your interest rate will be.  If you’re thinking of refinancing and have slow or missed mortgage payments then you would probably be better off trying for a loan modification.  Refinancing may be a better option if you are trying to get out of an adjustable rate mortgage or to pay off other credit debt which you are paying a higher interest rate now than you are with your current mortgage.  But even then it really depends on you credit score.

Repairing your credit should be your goal.  A remortgage will require at least a FICO score of 620, anything lower than 620 and you will most likely need a co-signer.  The mortgage broker you are working with can most likely point you in the right direction on how to quickly reestablish your good credit and get it back to a level that makes remortgaging a viable option.

If you would rather try for a loan modification there are a couple options open to you but your first stop should be with your lender. Contact your lender and ask them what options are open for you. The two federal options are Home Affordable Refinance Program (HARP) and Home Affordable Modification Program (HAMP) and each has its own qualifications.

HAMP is a program for homeowners to avoid foreclosure by working with the lenders to modify home loans. To qualify for this program you meet the following requirements:

• Use the home as your primary residence
• Have a mortgage less than or equal to $729,750
• Have gotten your mortgage before January 1, 2009
• Have a housing payment including principal, interest, property taxes, HOA dues, and insurance that exceeds 31% of your gross (before tax) monthly income
• Have a documentable hardship -- either a significant reduction in income or increase in expenses that was beyond your control
• Have a stable source of income sufficient to make a modified payment

HARP is more for creditworthy homeowners that have mortgages that are greater than the home’s value. To qualify for this program you must meet the following:

•  Own a one- to four-unit home

•  Have a mortgage that is owned or guaranteed by Fannie Mae or Freddie Mac

•  Have no late mortgage payments (more than 30 days late) in the last 12 months

•  Owe no more than 125% of the value of your home (on the first mortgage; combined loan-to-value ratio can be higher -- only first mortgage is refinanced