If you have been passing through a rough financial situation, it is possible to have a credit rating that may not be perfect. Having a bad credit rating you might also therefore be a little skeptical of getting a good mortgage interest rate if you plan to refinance or take a new mortgage.
Secondly, to make matters worse, the brokers and the lenders try their best to use your situation to their advantage and give you a higher interest rate than what you would have got if your credit score had a good standing. Well, you are not alone. And I would be lying if I tell you that your fears are misplaced. But if I tell you that there is no hope, that is not true either.
Okay, so how can you get a good mortgage rate even with having a bad credit rating? First of all, be confident. It might be a little difficult but it is not impossible. You might need to shop around a bit more. This is how you may want to proceed.
First, do the home work that everyone should do before starting the process to get a new mortgage. After your steps from the “home work” are complete you would know exactly how much mortgage you need and how quickly.
You should take advantage of the “Making Home Affordable” program started for the home owners who are “under water” as President Obama calls the home owners whose home values are now less than what they owe. The lenders against these programs understand that you credit would not perfect due to the bad economic situation around the world. You might be able to consolidate your loans and get a refinance done with the mortgage interest rate as low as 2 percent. If you consistently pay your mortgage with the new interest rate in hand, you would end up improving your credit history once again. The low interest rate of 2 percent or whatever the lender comes up with after analyzing your financial situation, would be offered for the first five years. That is ample time to start building your credit history towards the better once again.
To get the best rate from the Making Home Affordable program or even other wise, collect your past payment records, before you got into the financial mess, to show that your credit rating has been good throughout. You can always try to convince the lender that even in the worst financial situation you have not let your credit rating get out of hand entirely. The hit that your credit score has taken was entirely due to the collapse of the economy and you lost your job or business because of it. Many lenders might take your past records into consideration.
If you have got yourself a new job, you can use that to prove that you can prevent defaulting on the monthly installment payments since you have income now that was missing in the recent past.
You might be tempted to get a lower interest rate by putting in some down payments as points. You should think twice before falling for the temptation. Since the financial situation is already not very solid, it might not be a good idea to pay whatever cash reserve you have to buy a lower interest rate. If you keep the cash reserve you might be able to ensure continuous monthly payments even though you might be paying a bit higher every month than what you would pay if you get a bit lower interest rate. Being consistent on the payments is more important so that you can start building your credit rating once again for the better.
If all the odds are against you and you cannot get a mortgage to refinance and lower your payments, try to see if you can rent the home and you move into a smaller rental place yourself. The rent you might get for your home might help to pay off the mortgage of the home and even at least a part of your own rent.
The most important part is keep up the hope. Things would improve. It is rightly said “sunrise has never failed as yet!”
