Refinance with Bad Credit

There are a variety of circumstances that might make it a good idea for a homeowner to refinance his or her mortgage with an FHA refinancing loan, including:

• Imminent foreclosure on a current mortgage.
• Rising adjustable rate mortgages that are increasing your monthly payments to an unsustainable point.
• If your income is below the average for your area.
• If your mortgage takes up more than 31 percent of your income.
• If you live in the home that you wish to refinance.

FHA refinancing terms tend to be much more lenient than the guidelines offered by most lenders. Like any other loan, a FHA refinance loan requires a credit check before approval. However, the credit check for a for a FHA loan take into account your total credit history, giving heavier weight to your overall record as opposed to any current problems you may have or isolated incidents in the past. Overall, this creates a much more lenient set of conditions to get your home loan refinanced.

Even folks who have been through bankruptcy may qualify for FHA refinancing. Borrowers who filed Chapter 13 bankruptcy who have made all payments on time for a year are eligible for FHA refinancing. Chapter 7 filers who have been discharged for at least two years are also eligible for FHA refinancing.FHA refinance loans, like any other type of loan, require a credit check before FHA refinancing is approved. However, don’t be discouraged if you have bad credit because of recent hard times. The FHA credit check compares your overall credit activity to any negative information in your credit report. To qualify for an FHA loan for refinancing purposes, your general pattern of credit activity will be considered, not just current or past problems. You may be surprised to learn FHA rules are much more flexible when it comes to reviewing your credit history for an FHA refinancing loan.

A FHA refinance loan offers homeowners several refinancing options including:

• Cash out refinancing: This allows homeowners to refinance their home loan by taking out another mortgage for a larger amount than they currently owe, thus repaying the remaining amount of their current mortgage while tapping into the equity they have built up in their home to secure extra cash. This is a good option if you need cash and have substantial equity built up in your home.
• Straight refinance: Allows the borrower to refinance his or her home to lower monthly payments and/or interest rates. Refinancing can lower monthly payments by stretching out the length of the loan or by getting a lower interest rate on the loan.
• Streamlined refinancing: This allows home owners to cut the interest rate on their existing mortgage quickly and, in many cases, without having to have the property appraised. A streamlined refinance also reduces the amount of paperwork your lender will need to complete, thus saving the borrower time and money. The primary benefit of a streamlined refinance, however, is the reduction in cost to the borrower.

Only borrowers whose original home loans are FHA loans can get a streamlined refinance. This refinance must be used to lower the borrower's monthly payments. This option is good for folks who need a little extra breathing space in their monthly budgets.

Because of its more lenient requirements regarding borrowing history, a FHA refinance may be the answer for folks with bad credit seeking to refinance their homes. To find out more about FHA refinancing, visit the FHA Web site at www.fha.com.