Refinance Home Loans, Credit Problems, Bad Credit, Income Problems
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If you are refinancing your home, no doubt, you will want to optimize your cashflow with the lowest rate possible. This website and the nationwide research that supports it, uses a proven eMortgage auction to get the right wholesale lenders to bid for your loan application. If you are refinancing a home with damaged or bad credit - or if perhaps you think your situation is unusual, you might want to check the following table for criteria relevant to your particular scenario.

Lenders offer loans in respect to many situations.
Click on links from the table below for information about each subject.

  • Problem Credit / Bad Credit
  • Income Problems
  • Low Credit Score
  • No Income Check
  • Non Provable Income
  • Debt Consolidation
  • Prior Bankruptcy
  • Current Bankruptcy
  • Prior Foreclosure
  • Current Foreclosure
  • Closing Costs Financed
  • Secondary Financing
  • Deed Transfer/Refinance
  • Home Equity Loans
  • Fast Closings
  • Fast Cash
  • 100% Financing
  • Home Loans after Divorce
  • Credit Damaged by Divorce or X-spouse
  • Refinance X-Spouse off of Deed
  • Pay off X-Spouse
  • Prior Turn Downs
  • Pay Creditors at Closing
  • Pay Collections / Charge Offs at Closing
  • Pay Tax Liens or Judgments at Closing
  • Leave Collections Unpaid at Closing

  • Low Credit Score
    Most mortgage lenders are now using "credit scores" as the primary guideline for underwriting and approving loans. A credit score is a number; thus obviously digital in nature and therefore lends itself to automation. Online or off-line, a credit score can easily be entered into a computer program for time saving underwriting.

    In the majority of cases, this works well and keeps the costs down for folks with good credit or certain types of damaged or bad credit. However, it's often a deal killer for folks who've been trying to repair or re-establish credit. The formulae used by the three major credit bureaus, Experian (formally TRW), Trans Union and Equifax, are algorithms that satisfy the needs of the majority; but unfortunately outcast the needs of many families, deserving as anyone else, to live the American dream. If the combination of derogatory items on your credit report fall into play in an unfriendly way to these algorithm formulae, your credit scores will be calculated low; making it almost impossible to get a fair deal on a home loan; or perhaps, unlikely to be approved at all.

    The eMortgage auction can address this dilemma because we intentionally seek out lenders and programs that are "credit matrix driven" rather than "credit score driven". If you have a high credit score, you would likely get offers from "credit score oriented" lenders. If you have a low credit score, (i.e. below 500), offers would likely come from lenders that underwrite the old fashioned way; more specifically known as "credit matrix underwriting". With matrix underwriting, credit scores are irrelevant.

    Problem Credit, Bad Credit
    Credit problems are usually caused during a time period, several months or even years in succession, during which an individual or couple experience financial difficulties that were impossible to control. Late payments on credit cards, auto loans and/or other consumer debt can occur throughout a time period resulting in one, several or many accounts showing up derogatory on a credit report. Credit problems can be caused by an event, a period of problem time, a single occurrence of cashflow problems; or a string of events causing caseflow problems. The right mortgage underwriting can take this into consideration. If a credit report shows good credit prior to the problem, and if there is an explanation for why credit will be good in the future, intelligent mortgage underwriting should provide a fair and reasonably priced home loan.

    Income Problems
    Income problems are often caused by misfortune. Illness, loss of a family member, lapse of employment, career loss; and/or self employment issues can produce a devastating effect on someone's income, cashflow and credit. Usually, people that have experienced financial hardship as a result of income problems, simply need a fresh start. Extenuating circumstances, "outside of someone's control", can be an explainable cause, and if there is a realistic expectation that the problems have been resolved, the right lenders will often provide a home loan with a reasonable and fair rate for the home owner; often regardless of prior income problems, or problem credit.

    No Income Check loans are no longer available and/or Non Provable Income loans are no longer available
    "No Income Check" and "Non Provable Income" home loans and mortgages were often used for borrowers to close fast when proving income is either too complicated or time consuming. Today, non-occupying co-signers can help people qualify for home loans if income is not sufficient to qualify. Some common applications for these loans use to be for:

  • Self employed borrowers
  • Borrowers paid by way of cash rather than by paycheck
  • When paystubs, W2s or 1040s are not available

  • Debt Consolidation
    Debt Consolidations can be accomplished through 1st mortgage refinancing, secondary financing or home equity loans. A Debt Consolidation uses the equity in your home to combine several or all other consumer debt into one reduced montly payment. click for example of how Debt Consolidation works

    Prior Bankruptcy
    Depending on how long ago the bankruptcy, the greater your chances for a conforming rate mortgage. In addition, there are some lenders that provide almost conforming rates with bankruptcy discharged or dismissed only one year prior. That is in the case of a chapter 7 bankruptcy. In the case of a chapter 13 bankruptcy, there is usually no need to wait until discharge has seasoned.

    Current Bankruptcy
    If you are currently in chapter 13 bankruptcy, you may be able to qualify for a home loan. In fact, some lenders can actually provide FHA loans at low interest rates for borrowers in chapter 13. re: HUD Handbook section 4155.1 Rev-4. "A borrower paying off debts under Chapter 13 of the Bankruptcy Act may also qualify if one year of the pay-out period has elapsed and performance has been satisfactory, and the borrower also receives court approval to enter into the mortgage transaction."

    Prior Foreclosure
    Depending on how long ago the foreclosure, the greater your chances for a conforming rate mortgage. However, most mortgage lenders are generally more conservative when a previous foreclosure is involved. As a general rule, if the foreclosure is at least 2 years old, rates can usually come fairly close to conforming rates. If the foreclosure is more recent, slightly higher rates would likely apply with LTVs (Loan To Values) up to 90%.

    Current Foreclosure
    If you are trying to refinance your home while it is currently in foreclosure, the following extenuating circumtances and/or compensating factors may apply:

  • Lower Debt Ratio
  • Substantial Down payment towards the refinance
  • Explanation such as illness, loss of employment, family death.
  • Explanation why your financial situation has improved and will continue to be stable in the future.

  • If you are trying to refinance your home while it is in foreclosure, consider the the following:

    Sometimes you can. If you can't prove your income, you can often borrow up to 90% of the value of your house. However, you might be required to share future equity with either the government or your previous lender, because these programs now require negotiated settlements with the bank that is foreclosing. The goverment is behind this program with the right mortgage lenders providing funding for these programs. Some foreclosing lenders are cooperating and some are not. Some people are still better off selling their home to a relative. If that individual is credit worthy, often up to 95% of the value of the house can be borrowed which is usually enough to satisfy or otherwise negotiate settlements with the current mortgage company or other creditors. This will often give the distressed homeowner a chance to re-establish some credit and within a year or so, take the house and a new mortgage back into his or her name; thus relieving the friend or relative of any further obligation.

    Closing Costs Financed
    Lenders usually allow all closing costs to be paid through the the refinance; except for the house appraiser. As such, except for the cost of the appraisal, refinancing is ordinarily a zero "out of pocket" transaction. However, some lenders do also require an application, processing and/or credit fee to be advanced by the borrower in addition to the appraisal fee.

    Secondary Financing
    Lenders no longer allow secondary financing (2nd mortgages) up to 100% CLTV (Closing Loan To Value). For example; if the outstanding balance owed on your first mortgage is 80% of the value of your home, lenders no longer offer 2nd mortgage loans up to 20% of the value of your home in addition to that first 80% LTV (Loan to Value) mortgage. Thus, your existing 1st mortgage would can no longer stay intact "as is"; and a new 2nd mortgage can no longer be added to your debt on top of the 1st mortgage. The primary advantage to secondary financing is that closing costs used to be substantially less than closing costs associated with a complete refinance of a 1st mortgage. A disadvantage to secondary financing was that in proportion to amounts borrowed, monthly payments tended to run significantly greater than monthly payments associated with 1st mortgages. This is because with 2nd mortgages, interest rates usually ran higher and the number of years allowed for paying back the loan were usually less. As a general rule, if you were planning to sell your home within the next 2 years, secondary financing might have made sense. However, if you planned to stay where you were for more than 2 years, from a cashflow standpoint, it might have made sense to refinance your entire first mortgage to optimize your monthly bottom line. Although everyone's situation and needs were different. However, if cashflow was your primary concern, once you would have selected a lender, you might have wanted to ask your loan officer to run the numbers both ways (for secondary financing and complete refinance) so that you can select your best option. Nevertheless, this program no longer exists.

    Deed Transfer/Refinance available only between family members.
    A Deed Transfer/Refinance is much as it sounds. It is a purchase transaction in effect. In most cases it is required that the transfer be made from a family member. A refinance is ordered on the subject property by the new potential owner and the deed to the property is transfered simoultaneously with the closing of the refinance. With the correct set of circumtances, this can be done as a "no money down" transaction with all closing costs financed into the deal.

    Fast Closings / Fast Cash
    Most lenders actually have the ability to arrange "the lender's part of the job" for a fast closing in as little as 48 hours. However, no matter how adept they might be, they remain human and are also at the mercy of the title search and real estate appraiser’s schedule. Although we have seen rushed closings come together in 3 business days, a super rush almost always takes 5 - 7. Beware of promises from any “meaning well” mortgage lender or broker that promises a 3 day turn around. If cashflow is pressing, try to plan accordingly. If they tell you 3 days, count on 7 - 10.

    100% Financing is generally not availabe except for military veterans.
    There are no longer non-conforming lenders that offer one hundred percent (100%) refinancing. Higher credit scores can no longer get offers for 100% refinancing all within one (1) first mortgage. Lower credit scores were usually offered an "80/20 combo" which is was an 80% LTV (Loan to Value) first mortgage in combination with a 20% LTV second mortgage.

    Home Loans after Divorce
    Home Loans can usually be obtained by either spouse after divorce for a fresh start for both purchasing a new home or refinancing an X-spouse off of the deed .

    Refinance X-Spouse off of Deed / Pay off X-Spouse
    Provided you are in agreement with your X-Spouse about a settlement amount; and there is sufficient equity in the subject property, this can usually be accomplished as follows: A refinance is ordered in the name of the soon to be sole owner. At closing the refinance is funded paying off the existing mortgage plus the settlement amount to the X-Spouse. Simultaneously a new deed is transfered to the new sole owner of the property. Often the new owner/borrower is able to draw cashout funds from the same refinance to pay creditors, clear up credit issues and/or cashout for other personal reasons. It is usually also possible to use the same type of refinance and simultaneously add names to the new deed such as a new spouse, family members and/or other third party(s) that may want to share in the ownership and mortgage responsibility of the subject propertly. This can be helpful if stronger credit of the third party and/or the combined income of joint borrowers, can bring upon a lower interest rate - thus a preferable monthly payment.

    Credit Damaged by Divorce or X-spouse
    Everyone's life situation is personal, individual and rarely are any two divorce annals identical; nor are they often uncomplicated. The right lenders view divorce as an acceptable reason for credit problems. It's well known that a divorce can damage the credit of a credit worthy person. Some lenders understand this; and unfortunately, some say they understand it - but, actually do not understand it at all. Many lenders do not see the "whole picture" and therefore take the position that a borrower's credit was not damaged as a result of divorce because the derogatory history stretches over too long of a time period prior to the actual time of the divorce. Some say the interest rate offered should be high due to the risk factor. Others refrain from making an offer. However, the right lenders do understand that although sometimes a divorce can be triggered by a seemingly "overnight" situation, it is usually NOT caused by an overnight experience. As such, when divorce is a factor and a long term credit damaging history prevails, the right lenders may increase interest rates moderately to offset some lender risk, but not do so abusively. Success in dealing with these situations can be simplified by knowing which lenders understand divorce and which do not.

    Home Equity Lines of Credit
    A Home Equity Line of Credit is a "revolving loan". It is usually in the form of a 1st mortgage. However, it can be a 1st, 2nd or 3rd position mortgage. In effect, it works like a low interest rate credit card, but it is secured against your home. Borrowers can draw all or part of the credit line as desired.

    Prior Turn Downs
    If you've been turned down previously by a bank or lender, the eMortgage auction can be smart way to go. produces a high success ratio for people that have been turned down by banks and/or lenders which did not have suitable programs for those folks. The eMortgage auction is specifically designed to attract offers from the right lenders with the right programs for people with problem credit and income problems.

    Pay Creditors at Closing - Collections / Charge Offs / Tax Liens / Judgments
    When refinancing, most lenders allow any creditor to be paid at closing; including collection accounts, charge offs, tax liens, judgments and/or other creditors. When timely closings are required due to purchase contracts or agreements between a Buyer and Seller, this can help meet those time requirements.

    Leave Collections Unpaid at Closing
    If you owe money on one or several unpaid collection accounts, some lenders will allow you to close and leave those Collection Accounts Unpaid at Closing if either of the following applies:
  • On virtually any collection account having less than $1,000 balance.
  • On virtually any dollar amount for collection accounts that are at least two (2) old.

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    Last Update 02-07-2018