Financial Facts: Even with bad credit it may be time to refinance |

Financial Facts: Even with bad credit it may be time to refinance

Bob Kieber
Special to the Daily

Over the past 12 months I have been busy with many clients who have refinanced their home mortgage. They have reduced their monthly payments, reduced their non-tax deductible debt and consolidated mortgages. The one thing in common with most of these homeowners is the fact that most all of them have a stellar credit history. The refinance boom has pretty well dried up and to those of you who have not refinanced your high-rate mortgage due to a somewhat of a spotty credit history it may now be time to look at a refinance.

The reason is simple for stating that a refinance may be possible now. Months ago when all the home mortgage investors were working six days a week to keep up with the demand they would not hesitate to deny approval of borrowers with less than perfect credit. Now many of the home mortgage investors are looking at a slow down of incoming files and they have time on their hands to really study the less-than-perfect credit files. The other reason they are willing to look at these files is they have overhead to pay and people to pay, so they are a lot more willing to take the time necessary to properly consider the tough files.

As an example, I recently completed a refinance for a young couple whose credit history was blemished due to a medical bill that was being contested. The bill was sent to a collection agency and was for a whopping total of a little more than $500. My borrowers have medical insurance but it appears that the medical office failed to supply the required documentation so the insurance company denied payment. The bill is in collection and the collection now shows up on their credit report.

The borrowers have income to pay their monthly bills and with the refinance their payment actually was reduced as we consolidated a couple of other bills into one. We presented to the mortgage investor our case and after a few rounds of supplying wanted documentation, the refinance was approved.

Just because you have a blemish or two on your credit history is no reason to discount the possibility of being approved for a lower mortgage rate.

Now I need to also add into this article the fact that if your credit history is blemished due to your misuse of your credit you may have just shot down your chance of a refinance. As an example, I met with a potential borrower one day and we discussed if a refinance was possible. This borrower had many late payments on the credit report and the reason was the borrower decided that the interest rate being paid on the credit card was too high. So the borrower decided to teach the credit card company a lesson by not paying the bill on time. Bad idea. A really bad idea.

This potential borrower shot himself in not one foot but both feet. In teaching the credit card company a lesson he will be paying the high mortgage interest rate until he sell the home or wins Lotto and pays off the mortgage. Making bad choices is not an acceptable excuse to mortgage investors.

So if you have put off refinancing now just might be the time to sit down with a mortgage professional to determine what is possible in your case. And, if in fact, due to your credit it is not possible you will learn what you need to do to clean up your credit so it may be possible down the road.

For answers to your mortgage related questions call Bob Kieber at (970) 485-1312 or email him at Bob is a local mortgage lender with Millennium Bank. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country.

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