Loans

Mortgage rates are at historic lows, and with that said it seems like everyone’s jumping on the refinance bandwagon and taking advantage of the market drop. But is it really a good idea for people with bad credit?

Well, if your credit was better when you took out the original loan and helped you qualify for a low rate, then refinancing when your credit is worse makes little sense at all. If your credit is better now, but still not a good as you wanted to be, then you should analyze how much you could really save by refinancing now, as opposed to waiting until you have time to improve your credit even more. If your credit is at about the same level now as it was when you first purchased, trends in the market will influence how much you can or cannot save by refinancing your home.

Of course there are other considerations, such as whether your current home loan requires you to pay mortgage insurance that refinancing could alleviate; the type of loan you have; an introductory “pre-pay” period that may be about to expire; and additional factors your loan officer or financial planner can explain.

Once you decide that refinancing makes sense for you, you have two options: repairing your credit before applying for a loan, or apply for a loan right away without attempting credit improvements. If you decided to repair your credit first, be prepared to spend time and money for paying debts you owe.