Many people over the last few years jumped into the real estate market. Whether they were in the market to try and “flip” a property or were establishing roots in a community by purchasing a house, the real estate market was hot and this caused interest rates to rise.

Now that the real estate market has crashed and interest rates have come down, this is the best time to refinance your mortgage. Rates have dropped over a point on 30-year mortgages in the past year. A rate drop like that can mean significant savings for a homeowner.

But you might be holding off due to your credit rating. Perhaps you have had some credit problems before. You might have been late with credit card payments of a car payment or even student loans. Because of these blemishes on your credit record, you may feel you won’t be able to refinance your mortgage.

DO NOT LET THAT STOP YOU!!

Now more than ever is the best time to refinance your mortgage, even if you have bad credit. Why? With the government stimulus plan, banks and lenders have been encouraged to give BAD CREDIT MORTGAGE REFINANCE LOANS.

Refinancing mortgages is good for everyone. It’s good for the banks because with a lower interest rate, the borrower is less likely to fall behind on payments and forcing the lender to take the home back. Lenders do not want to take back homes and be forced to sell them. It is expensive and time consuming for them.

As for you the borrower, now is the time to refinance before interest rates start to head back up. Rates have been dropping and banks now have government incentives to loan you money. With rates dropping a point this year, this can lead to big savings on your mortgage.

Here’s an example of the savings by refinancing your mortgage. IF you have a 30-year fixed rate mortgage at 6.25% on a $250,000 mortgage, your monthly payment is $1,539 per month in just principal and interest. By refinancing with a 5.25% mortgage, the payment drops to $1,380 per month. This is a savings of over $150 per month!

This is a no-brainer. The savings are huge. So even if you have bad credit, it will pay for you to go out now and get a bad credit mortgage refinance loan.

You will obviously search the internet for mortgage companies that provide bad credit mortgage refinances, but be careful, there are a bunch of scammers and rip-off artists out there looking to screw you out of your hard earned money. This article will tell you what to watch out for and how to protect yourself while shopping for a mortgage.

First thing to watch for are advertisements sating they are a government agency.  In fact you may have already received mail from an official sounding agency or mortgage company. These companies might not in face be your lender or an official government department. The letter may say something that looks official like this: Important Notice From Your Mortgage Company. Or something like Important Financial Information Enclosed-Do Not Discard. These may look all official but are probably not from your kinder at all and are from a mortgage company looking to get your mortgage. These letters may even tell you what your mortgage payment is and what your loan balance is. How do they get that information? It’s all in the public records in your county. Before doing business with them, check to see if it is your mortgage lender and not just a sales brochure from another mortgage company.

Another scam is the official government looking envelope with forms and markings that make it look like it came from a government agency. It might say something along the lines of You may be eligible to take pat in an exclusive interest rate reduction, this bank has been licensed by the government to negotiate your existing adjustable rate mortgage into a fixed rate mortgage. The envelope might come to you with references or a seal on it to look like it’s fro the government. Odds are it isn’t. The simple way to check is to look in your phone book in the blue pages. If the agency listed in the mailing isn’t there, then its some mortgage company looking for your business.

Watch for Deceptive Mortgage Ads

Here are some phrases you’ll see in ads to entice you, but let’s examine them closer and see what they really mean.

Mortgage rates at 30-year lows! Rates as low as 1% Pay only $700 a month on a $250,000 mortgage!! With rates current around 5%, 1% sounds great. But it’s a teaser. This rate will only be for a very short time, perhaps for the first 3 months. After the 3 months that rate will suddenly be jacked up and you will be in for payment shock. To protect yourself, you need to careful check what the interest rate is and payment will be for each month of your mortgage. This has burned many people. They thing the tease rate was for the life of the mortgage and found they couldn’t pay their mortgage after the rate shot up.

Low Fixed Rates! Once again, sounds good. But the question you need to ask here is how long is the fixed rate? Some unscrupulous lenders will offer you a fixed rate for as little as 30 days, then change the rate on you. Again, you must know what the rates and payments will be for the entire length of the mortgage.

Super Low Payments! This one has hurt borrower more than anything else. You will see a quote for a low payment. Here you have to ask the following question. What does that payment cover? Some lenders advertised low payments, but the payment was only for the interest on the loan. People were making payments, but none of the payment went to lower the outstanding principal amount. Some loans didn’t even cover the interest portion and that amount was added to the total mortgage. Homeowners found they were making monthly payments, yet the mortgage balance was going UP instead of DOWN!!

These are the main things to look for when you go for a mortgage on the internet. Now that you know what to watch out for, you can obtain a bad credit mortgage refinance loan with confidence.

You may currently have a bad credit score. This might be from past problems with credit cards, personal loans or maybe a repossessd car. These events certainly don’t help you in getting a loan, BUT IT DOESN’T DISQUAIFY YOU EITHER.

If you are currently having problems with paying your mortgage or with your other debt, refinancing may be a way to help you out of this situation. If the current interest rates are lower now than when you first got your mortgage, you are a candidate to re-do your mortgage and get a cheaper rate and save money.

Depending on the equity in your home, it may be possible to move your debts like your credit card into a new mortgage. This can help you lower your over all monthly payments and give you a chance to get back on your feet and start to improve your credit score.

You will need to determine several things to see if this works in your favor. You should know the current balance of your mortgage and the value of your home. If you have equity in your home, then you may be able to refinance your existing mortgage and use the extra money from the refinance to pay down a credit card loan or car loan. With mortgage rates around 5% now, that is a heck of a lot better than paying over 20% on a credit card.

Is refinancing a mortgage with bad credit the right thing to do now? It all depends on how the numbers add up. I know it’s not a pleasant thing to sit down and figure out all the numbers to see if it works. But for most people this will be the easier way they can save money on their monthly budget. The difference between a 5.25% and a 6.25 $250,000 mortgage is over $150 per month! That is $150 that could be going to your savings or paying down other bills or even taking that vacation you need.

Take the next step now. Start looking at your mortgage and your bills and see if refinancing your mortgage with bad credit makes sense.

When you have bad credit, the terms of the mortgage won’t be as good as someone with a good credit score. But there is one place that is designed to help homeowners having credit problems or bad credit. This may be the program that helps you get the right mortgage and help your credit situation.

With the current government stimulus plan, plus the government looking to help people who are currently having mortgage problems, the Federal Housing Administration may be the place to find the right loan for you.

How to qualify for an FHA Mortgage when you have Bad Credit.

To start qualifying for FHA’s credit standards, if you have had a bankruptcy, it must be closed and occurred more than 2 years ago. If you’ve had a foreclosure, it has to be at least 3 years ago.

If you have bad credit, you must show to FHA that your credit problems are behind you or that you are currently working to clean them up. This means you can show FHA that you have been current with your bills. A track record of paying them on time for about a year will show good faith in fixing your credit.

To qualify, you must be able to document your income. With the present economic situation, lenders need to see your income. You should be able to show you have steady employment. What if you’re self-employed? You will probably have to show about 2 years of income. These are just general guidelines. Always ask the lender for specifics. It never hurts to ask, right?

Your total monthly payments for housing and other debt should not exceed 43% of your monthly gross income. If possible, pay down or pay off your debt to show a better income to debt ratio and improve your chances of getting a refinance mortgage.

The new loan from FHA cannot exceed the loan limits FHA establishes for your area. The current ranges are from $270,000 to $729,750.

You can refinance up to 96.5% of your homes value. This does not allow you to take cash out. What’s great about this is that you obviously don’t need a lot of equity to obtain a loan.

This is just a quick introduction to getting this mortgage. Read some more to learn about FHA loans to help you get mortgages for bad credit.

What is considered a bad credit score for a mortgage?

Credit scores range from 300 (low) to 850 (best). Scores between 580 and 620 are considered low. Below 580 is when you enter bad credit territory. When your FICO score is below 580, you can still get a mortgage, but the terms of the loan will not be as good as someone with a good credit score.

What does that mean my loan won’t be as good?

Because you pose a higher risk to the mortgage lender, they will charge you a higher rate of interest on the mortgage as opposed to someone with good to excellent scores.

What should I do?

The first thing to do is to see if you can raise your credit score. This can be done several ways. Do not open any more credit lines. Yes it’s tempting to get a new store credit card when they offer you 10% off, but this only going to hurt your credit score and cost you more in mortgage interest in the long run. Another thing to do is to lower your outstanding credit card balances to below 33% of your available credit line. Example, if your credit card has a credit line of $3,000, don’t borrow more than $1,000 against it.

Are interest rates negotiable with a bad credit mortgage?

They won’t tell you this but the answer is yes. People with bad credit have very different reasons as to why they have bad credit. You may be able to sit down with the lender and explain your situation. Maybe you have recently got a raise or a better job so you can afford more each month. Perhaps you just paid off a car or a credit card and it isn’t reflected on your credit history yet. Remember it always pays to try to negotiate with a mortgage lender.

Should I just go to the mortgage company in my area?

NO! With the Internet, all mortgage companies are now local so to speak. You can easily show for your mortgage on the web instead of calling each lender for their rate quote. You are able to visit their site and compare rates and terms with other mortgage lenders you have found online.

How can I improve my credit score?

One way may be to get a bad credit personal loan first. Pay it off quickly so you can show the credit companies you can handle debt and are able to pay it off ahead of time. This may raise your credit score.

Hopefully this answered some of your questions. Now go use the power of the Internet and check out mortgage lenders online to get the best bad credit mortgage refinance rate.