Bad Credit Mortgage Refinancing: Avoiding Hidden Costs

By Gabriel Traverso
Mortgage Credit Problems Columnist

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When you first closed your home loan were there charges you didn't expect? How do you avoid them now that you want to refinance?

Time to Refinance: How to Avoid Hidden Charges

Warning: not all mortgage lenders are the same! One loan officer might take the time to explain all the charges and go into detail with you until you understand every last detail and another might not. Bad credit means you'll probably pay more to refinance your home loan, but it doesn't mean you have to be blind-sided. Now that you want to refinance your mortgage, how do you avoid these surprises? Ask questions!

What are Hidden Charges?

The word "hidden" tends to imply deceit, but that isn't usually the case. In fact, some homeowners think they were tricked into paying more when in reality they simply didn't understand the home loan they were buying. The responsibility for what you commit to is yours. When it's time to refinance your mortgage here are some fees you can ask about:
  • Discount fees
  • Application fees
  • Origination fees
  • Third party fees
  • Prepayment penalties
  • Conversion fees
Ask your mortgage lender about these and find out if there are any other fees that might apply to your loan--now or in the future. Before you refinance make sure you really understand how the new mortgage works before you sign. Another great question to ask is whether any of these fees can be waived or negotiated.

The Impact of Bad Credit on Your Mortgage

When you have bad credit the result is that you will pay more for your home loan than someone with perfect credit, pure and simple. However, there are ways to reduce the problem. Find out from your loan officer if there is anything you can do to improve your bad credit and get a better deal on your mortgage refinance. You might find that by waiting six months and paying off  credit cards that you could get a much better deal.

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