Posted on: 29th Oct, 2008 01:07 pm
hi, i currently have a fixed rate 6.75 % home mortgage. according to my recent homeowners tax assessment i have aprox 54000 in equity. i would like to refinance and take aprox. 30,000 out to pay off other debts that are killing me monthly. the problem is that my credit score is only around 588. does anyone know if it is even possible for me to do this? any advise is appreciated.
jodi
jodi
There is going to be quite a bit that the lender is going to look at - not only are they going to look at the bottom line (your credit score) but what happened in your credit that gave you that credit score - mortgage lates? high revolving debt? judgements/liens? Having a low credit score will definately make it a bit harder for you to get financed - but its not out of the question. Conventional still offers cash out refinances at lower scores but far and few between - my suggest would be to find a lender who does FHA.
Secondly, the equity in your home is not based off tax information - your equity is based off the value of your home vs the amount of liens you have this is how a LTV (loan to value) is calculated.
Some independent credit unions have a program to give you a small line of credit based off the tax equity in your home - but this is generally reserved for borrowers who have higher credit scores as these types of loans don't generally go through the standard underwriting process which requires a need for a 'better borrower' type thing.
I would really focus on getting your credit score up - find a reputable company to assist you in cleaning up your credit, or do it yourself - pull your credit, find you delinquencies and pay them off, get your revolving debt down to no more than 40% used (credit card usage should never be above 50% usage) - if you have items on your credit report that you don't feel that they are yours - write the credit agency where you pulled your credit from and ask them to investigate - if they cannot prove the debt is yours, by law they have to remove it. Pay off bad debt / collections / etc and wait 90 days for your score to adjust it self out.
Secondly, the equity in your home is not based off tax information - your equity is based off the value of your home vs the amount of liens you have this is how a LTV (loan to value) is calculated.
Some independent credit unions have a program to give you a small line of credit based off the tax equity in your home - but this is generally reserved for borrowers who have higher credit scores as these types of loans don't generally go through the standard underwriting process which requires a need for a 'better borrower' type thing.
I would really focus on getting your credit score up - find a reputable company to assist you in cleaning up your credit, or do it yourself - pull your credit, find you delinquencies and pay them off, get your revolving debt down to no more than 40% used (credit card usage should never be above 50% usage) - if you have items on your credit report that you don't feel that they are yours - write the credit agency where you pulled your credit from and ask them to investigate - if they cannot prove the debt is yours, by law they have to remove it. Pay off bad debt / collections / etc and wait 90 days for your score to adjust it self out.
Thanks for the information.
I have not had any late payments on my house for almost 2 years. My credit score is low because of late payments on other debts. Unfortunately, we had a tragedy and have been paying medical costs instead of credit card and car payments, etc. My husband and I should more then qualify with our income, it is just the recent low credit score that I'm worried about.
I will check into FHA as you suggested.
Thanks
Jodi
I have not had any late payments on my house for almost 2 years. My credit score is low because of late payments on other debts. Unfortunately, we had a tragedy and have been paying medical costs instead of credit card and car payments, etc. My husband and I should more then qualify with our income, it is just the recent low credit score that I'm worried about.
I will check into FHA as you suggested.
Thanks
Jodi
Yeah, I can understand - as much as I hate to say it - the mortgage always needs to come first when deciding what to pay.
588 is not unheard of, just makes for a bit more work for us underwriters :)
Good luck to you.
588 is not unheard of, just makes for a bit more work for us underwriters :)
Good luck to you.
FHA is your only hope
It will require clean payments for 12 monts generally or a really good letter of explanation.
If you have other solid areas in the file (like employment and income) it makes it easier to look past the lower score.
Brian
It will require clean payments for 12 monts generally or a really good letter of explanation.
If you have other solid areas in the file (like employment and income) it makes it easier to look past the lower score.
Brian
