In the past even individuals with bad credit were often able to get the financing they needed so long as they owned one important asset: a home. The current mortgage and housing market collapse has made it tougher than ever to get a bank loan even if you own a home for collateral. This leaves many people asking a very important question: Is it possible to get refinance loans for bad credit?

There are many reasons to refinance. A new car, home repairs, even paying off high interest credit cards are all good reasons to seek refinancing options. In the past the first place a home owner usually looked to refinance was their local bank. That may not be the wisest first option any longer. If you need bad credit refinancing, loans from a bank are unlikely. However, it is important to note that “bad credit” is a relative term and what used to be bad is not a total loss anymore. To consider your financial situation bad your credit score should be less than 600.

If your credit score is over 620 but still under 680 your score is now considered “okay” in the new economic viewpoint. Of course, from a refinancing standpoint it’s still shaky, but you do have several options. A bank not your best bet. Mortgage brokers are a good place to look and it is important to know that they will love you. The reason is that you are teetering in very dangerous territory and it will be difficult for you to get the refinancing you need any other way. They know they are your only real hope, and they also know that you are struggling. This puts them at a very unique advantage to get you the financing you need on their terms.

When you approach a mortgage broker it is still important to be prepared. Being prepared for what you are walking into may even give you a little bit of a bargaining edge. Knowing where you stand with your credit and what makes it bad, worse, or desperate can help you when it comes to negotiating terms of a loan. Of course you will need the regular paperwork: proof of employment and copies of current bills. What you should also have is a complete budget workup proving that you can afford the payment for the loan you are seeking. Have a copy of your credit reports from all three reporting agencies in hand as well. If there are any discrepancies make sure they have been cleared up before you apply for refinancing. Be prepared to explain troublesome spots on your credit report as well.

If your credit score is truly bad, as in less than 620, your only option may be an FHA loan. The FHA (Federal Housing Authority) has more access and up-to-date knowledge of any government actions to help home owners including recent stimulus advantages. The bottom line is that your bottom line is important, but you do still have options for bad credit refinance loans.