Bad Credit Mortgage Refinance: Know Your Closing Costs

By Gabriel Traverso
Mortgage Credit Problems Columnist

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If you have bad credit, you will quickly learn that you have fewer options when it comes to a mortgage refinance than borrowers with high credit scores: You may not be able to borrow as much because lenders will require a lower loan-to-value ratio. This combined with rising closing costs can force the amount you can borrow down.

Refinance Your Mortgage: The Impact of Bad Credit

Getting a mortgage refinance means replacing your current home loan with a new one. For bad-credit borrowers, it is vital to know what closing costs to expect — you may need to have cash on hand in order to close the loan.

When you refinance your mortgage there are a number of closing costs you can expect to pay:
  • Origination fees, and possibly points
  • Credit report
  • Title search
  • Title insurance
  • Appraisal fee
  • Application, underwriting, or document preparation fees

Avoid Surprises: The Cost of Closing

You can get a rough estimate of closing costs when you shop for a mortgage refinance. Lender requirements will vary, as will interest rats and points charged. Your financial situation will largely determine these figures. Even if you refinance with your current mortgage lender you can expect to pay some fees at closing. When you apply for your mortgage refinance, lenders are required to furnish a good-faith estimate (GFE) of closing costs and a truth-in-lending (TIL) disclosure. Ask if you can finance the closing costs with the home loan, though beware of higher interest rates as a result. Shop with multiple lenders, online or in person, to get the best refinancing deal.

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