What You Need to Refinance Now

By Michele Lerner
Mortgage Credit Problems Columnist

If you are a homeowner with equity in your home, first, pat yourself on the back for making a good investment. However, if you have extensive credit card debt and are looking for a home refinance to give your debt relief, you may have some trouble qualifying for a new mortgage.

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Credit standards among lenders remain tight this year and plenty of applicants are looking into refinancing before mortgage refinance rates rise. The good news is that homeowners with stable income and enough equity may be able to qualify for bad credit mortgage refinancing. Complete the form on this page to reach bad credit mortgage lenders to see if you can qualify.

Homeowners with credit card debt should at least apply for bad credit mortgage refinancing, because they may be able to reduce their monthly mortgage payments and apply that extra money to their credit card debt. Alternatively, homeowners with plenty of equity can apply for a "cash-out" refinance that would allow them to use their equity for debt relief and pay off all or most of their bills.

Home Refinance Tips

  • Figure out how long it will take you to recoup the cost of a home refinance. Closing costs typically cost 3% to 6% of the mortgage and can be wrapped into the loan if there's enough equity there. Divide those costs by the amount of monthly interest savinged with a mortgage refinance.
  • Lenders typically refinance only up to 85% or 90% of the home's value. Second mortgages can make it more complicated. FHA allows refinancing to 96.5% of the property value.
  • Most lenders require a credit score of 620 or higher, with the best rates reserved for borrowers with a credit score of 720 or higher. Bad credit mortgage lenders are more lenient and may be able to help you find a way to increase your credit score.
  • Lenders also look at the ratio of your debt to your monthly income. Typically, lenders want all debt payment, including housing expenses, to be 40% or less of your gross monthly income.

Sometimes, a bad credit refinance is possible when the homeowners have enough equity and income to offset their credit card debt. Find out where you stand by entering your information on this page.



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