Do You Have Bad Credit and Need Cash?
By Gina PogolMortgage Credit Problems Columnist
Jim Asks: Dear Gina, I need to refinance out of my bad credit mortgage and hopefully get some cash to pay off credit cards. The problem is once I got my scores above 600, lenders decided they wanted 700! I can't keep up! And if I don't reduce my monthly payments, I won't be able to continue paying on time and my credit will get bad again.
Gina Says:
Dear Jim,
You are right; lenders are making it harder every day to get approved for a home loan. And home equity money is tough to get too. Your best best is probably an FHA cash-out refinance. FHA loans don't require a high credit score, and you can get a loan for up to 85% of the value of your property. If you have a high interest sub-prime mortgage, you could save a lot of money by refinancing. And by retiring credit card debt you save even more.
FHA Home Loans Are not for Deadbeats
You do have to show the underwriters that you have cleaned up your act and that you pay your bills on time. Your recent credit history must be clean, and especially your mortgage payment history. If you had a bankruptcy, it has to have been discharged at least two years ago (one year for Chapter 13). If you have a foreclosure in your past, it must be at least three years old.
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Your loan amount must fall within FHA loan limits for your area. In Louisiana, FHA loan limits range from $271,050 to $287,500 for a single family home. If you don't have equity in your home and can't refinance the normal way, check out www.makinghomeaffordable.org to see if you are eligible for a loan modification--you won't get extra cash to pay off credit card bills, but you may get a much lower mortgage payment. Then, put your credit cards on ice and use the savings to pay them off faster. You could find yourself out of the woods in very little time.
Good luck,
Gina
About the Author
Gina Pogol has over a decade of mortgage lending experience, in addition to practice as a paralegal for a bankruptcy attorney, and as a business credit consultant for Experian. She is also certified to underwrite Fannie Mae loans. She earned her BS in Financial Management from the University of Nevada.
All information provided “as is” for informational purposes only, and is not financial advice. MortgageCreditProblems.com, its affiliates, and any of the independent providers of information on this site shall have no liability for any informational errors or incompleteness, or for any actions taken in reliance on information contained herein.
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