It is much more difficult to get a refinance mortgage with bad credit, but it is still possible. (Unnamed Copywriting)

It is much more difficult to get a refinance mortgage with bad credit, but it is still possible.

Getting a mortgage with bad credit is not as easy as it once was. During the height of the mortgage refinance boom, it was harder to find a borrower that could not be approved for a refinance than one that could. Basically, for every borrower out there, good credit and bad credit, there was a home loan program to fit them into.

But, with the mortgage crisis has come an end to creative financing. Loans that were once extremely easy to get approved are now completely impossible to obtain financing for anywhere. For instance, home equity loans used to be very approvable for almost all borrowers. For most refinance loans and purchase mortgages, a second mortgage or home equity line was simply added on to the loan as a second thought. Now, however, unless you have absolute tier one credit, it is highly unlikely that you will even be able to get approved for one.

Getting a mortgage loan with no money down was also quite easy. Even if you had no income and a very low credit score, it was likely that with the proper setup, a loan could be found to get you financed. The problem, of course, is that these were the first loans to start going default, and were also the ones that did so at the highest rate.

The result was that most of the banks that were offering these mortgage programs have shied away from anything but good credit lending. These banks have simply seen too sharp of an increase in both mortgage defaults as well as foreclosures from people in these markets.

But, there is still one program that is lending to bad credit borrowers. The FHA program has filled the void that was left behind by sub-prime loans. These government insured loans are not driven by credit score, but more by the credit worthiness of the individual borrowers. This means that there are loan programs through the FHA that are available for a large number of bad credit borrowers, but unlike the loans of the past, it is the responsibility of the prospective borrower to prove to an underwriter that they are worth taking the risk of lending money for a mortgage to them.

An FHA home loan is not a completely worse program than the loans of the past, however. It is true that it takes considerably more work to get an underwriting approval. But, these approvals carry with them the best mortgage terms in the business. The mortgage rates are typically as good as, if not better than the rates being offered to tier one borrowers at the local bank. And, unlike the sub-prime loans of the past, these are thirty year fixed rate loans, so there is no fear of your rate increasing later down the line.

While the lending world has changed, with a right attitude, and the right amount of work, a borrower with bad credit still has one good option available to them for mortgage financing.