Refinancing through a Mortgage Broker

When evaluating the mortgage refinance process and approval rate of people with bad credit, it becomes clear that one of the most important determining factors is where the borrowers apply for refinancing. For example, many applicants with bad credit who visit conventional banks or credit unions to apply for a mortgage refinance are systematically declined, especially now that the Federal Reserve has recently begun tightening the nation's credit belt. However, unbeknownst to some, those same people could immediately thereafter apply with a mortgage broker and be approved, with some even qualifying for fairly low interest rates.

The reason for this apparent anomaly is that banks and credit unions generally have home loan- and mortgage refinance programs that employ very specific – and stringent – underwriting guidelines. If the borrower doesn't happen to match those guidelines or meet the institution's requirements because of bad credit, they won't qualify for the program being offered. Occasionally the conventional bank or credit union might approve a borrower with marginal credit, but such an individual will invariably pay a substantially higher interest rate for the loan, in addition to elevated closing costs.

Needless to say, this often presents a stumbling block for many seeking new home loans or refinancing of their existing mortgage but also suffering from bad credit. Many people stop trying to get approved after being rejected by the first lender, interpreting the bank or credit union's unfavorable decision to mean that they simply do not qualify for a new mortgage or refinancing, period. The disqualification because of sub-par credit causes apprehension to try again, not to mention a distinct feeling of embarrassment.

But, trying again is exactly the course of action that the bad-credit borrower should follow. Of course, this isn't to say that the person should apply all over town, hoping that someone will eventually say "yes". Such action will generally only result in a good deal of wasted time. Instead, the borrower should attempt to simultaneously gain access to multiple loan- and refinance programs by applying with numerous lenders at once through the utilization of a single mortgage broker. Brokers can work with dozens of lenders that offer a variety of programs to meet the needs of borrowers with virtually any type of credit background. There are literally thousands of mortgage refinance programs available for people with good or bad credit, and these programs offer a wide variety of underwriting guidelines for almost any situation as well, including high debt-to-income ratios, low- or no equity, hard-to-document income (such as that of people who are self-employed or paid by commission), slow payment histories, and even recent bankruptcy.

So for those with bad credit that want to refinance their mortgages, take heart. There are mortgage brokers out there who represent dozens of specialized lenders, and many of those lenders offer refinance programs with approval guidelines that can accommodate a person's unique financial situation – including bad credit. If they cannot get a borrower approved, they'll generally offer advice on what can be done in the short- and mid-term to improve the individual's credit enough to qualify.

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