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Refinance Your Home with Bad Credit (bad credit mortgage Refinance)

If you currently have a bad credit loan, you may now be eligible for a mortgage refinance to a prime rate or “A Paper” loan. Mortgage refinancing requires more documentation than it did five or six years ago when no-documentation loans were prevalent. If you have maintained an improved financial picture, and are thinking of refinancing, now is the time. Rates for all types of mortgage loans are low.   Gathering the following documentation ahead of time can help you prepare for some of the paperwork required for a refinance away from your bad credit mortgage. 

Two forms of government issued id, one with your photo.  A few examples are a passport, driver’s license, state id, social security card.  Make a legible copy for the lender. 


If you bank online, download your bank statements covering the most-recent two months. Make sure the statement shows your name, address, starting and ending balances and a partial or full account number.  The lender will want actual statements, not a transaction history.  A transaction history doesn’t document the account holder information. 


If a portion or all of your income comes from commission or bonus income, you are self-employed or you own an investment property, you will be required to show the most recent two years tax returns.  The tax returns will need to have been filed with the IRS.  If you are self-employed, 1099s are considered part of the tax return.  Make sure you have those, too. If your tax returns reveal declining income, expect the lender to ask for additional documentation.  Income stability is crucial if you expect to qualify for a good credit loan.  


Make a copy of your Social Security Awards Letter or Pension/Retirement Letter, if you have recently retired. If you are employed you will need to show your most-recent paystub and W-2. 


If you have investment property or own any other real estate, gather last year’s property tax statement and property insurance declaration page.  Your loan officer will need to include the tax and insurance amounts in your debt-to-income ratios, and will need this documentation, too. 


If your credit report shows any inquiries, or multiple addresses, you may have to write a letter explaining what the inquiries were for, and state whether or not a new account was opened.  If your credit report shows multiple addresses, don’t be alarmed.  This is very common since credit reporting agencies don’t update your known addresses, and your prior residence from a decade ago may still be showing.  You may have to write a brief explanation of this address.   


Even though some of the documentation requested doesn’t make your ability to pay back the loan any stronger, and may seem unreasonable, tighter federal lending regulations require it, regardless of credit, income or assets.  Knowing what to expect, and being prepared ahead of time will help your mortgage refinance process go smoothly.    


  10 Steps to Home Ownership:

Step 1: Are You Ready?

Step 2: Hire a Realtor

Step 3: Get Loan Pre-approval

Step 4: Search for Homes

Step 5: Choose a Home

Step 6: Obtain a mortgage

Step 7: Make an Offer

Step 8: Insure Your Home

Step 9: Close the Deal

Step 10: Avoid Foreclosure


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