By Michele Lerner
Mortgage Credit Problems Columnist

Homeowners with bad credit or too much debt may think they cannot qualify for today's low mortgage refinance rates. But sometimes refinancing your home can be the solution to your financial problems.

The best way to find out if you qualify for a bad credit mortgage refinancing is to complete the form on this page for bad credit mortgage approvals.

A poor credit mortgage can sometimes reduce your monthly payments, allow you to consolidate your debt and to improve your credit rating.

The Federal Reserve advises all consumers, whether they have good credit or need bad credit mortgage refinancing, to ask the following questions of their current lender and two or three other lenders before choosing a loan.

Ten Questions to Ask Bad Credit Mortgage Lenders

1. What type of mortgage is this - fixed-rate, adjustable, FHA, VA?
2. What is the length of the loan?
3. What is the starting interest rate?
4. Can the balance you owe on the loan rise?
5. Does the loan payment include an escrow or reserve for taxes and insurance?
6. What is the estimated total monthly payment (principal, interest, taxes, property insurance, mortgage insurance)?
7. What are the estimated fees and other settlement (closing) costs?
8. Does this loan have a prepayment penalty? If so, how much could it be?
9. Does this loan have a balloon payment? If so, how much is it?

10. If the loan has an adjustable rate, ask:

1. When is the first rate adjustment?
2. What is the most the rate could be at the first rate adjustment?
3. What is the most the monthly payments (for principal and interest) could be after the first rate adjustment and over the life of the loan?

The answers to these questions should match the disclosure on any Good Faith Estimate (GFE) that you get from a lender. This disclosure is required when you apply for a mortgage.

Compare mortgage rates from various bad credit mortgage lenders by completing the form on this page.

Next, estimate what your potential monthly savings will be with your new loan. Closing costs on bad credit mortgage refinancings are usually the same as any other home refinance and can run as much as three to six percent of the loan cost. The costs can often be wrapped into the loan.

If a home refinance can help you gain control of your household budget and improve your credit, the benefits will far exceed the costs.

Sources

http://www.federalreserve.gov/pubs/refinancings/mortgage_shopping.pdf

Other Recommended New Home Loan Articles

• Home buyer classes: How to educate yourself on financing and ownership
• How to make sure you can afford your mortgage
• Loan types for borrowers with poor credit