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.

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.