Credit Card Settlement Program Tips for Getting a Loan

BILL'S ANSWER

The answer is that is extremely unlikely.

When you are in a debt settlement program (where you are not paying your bills, but instead saving funds for lump sum settlements) your credit will be tarnished by late payments and credit derogatories and you will almost certainly not qualify for a loan until after you graduate.

What you can do, however, is get a free quote from a lender and see if you could qualify and get the loan officer's opinion on what you would need to do to qualify for a refi loan: Mortgage Refinance Quote

If you would like to learn more about how to qualify for a refinance loan, I will try to cover that as well. Here are the main considerations that a lender will consider:

First, your credit history is a major consideration when you are shopping for a new mortgage. A favorable credit score will increase your chances of finding the best loan with a low rate and low points, since you will qualify for better interest rates than those available to people with credit problems. Currently, the average interest rate for a new 30 year fixed-rate loan is right around 5%, and the average FICO credit score is 723. So, if your credit score is better than 720, you should expect to qualify for an interest rate of around 5%, or possibly lower. However, if you have had credit problems in the past, you could be forced to pay a significantly higher interest rate, which could make your monthly payments much higher. For example, the monthly payment on a $100,000 30 year mortgage at 6.5% is approximately $630, plus insurance, taxes, etc. If the interest rate on the loan increases to 9.5%, the monthly payment increases to $840, an increase of over $200 per month. As you can see, your credit score, which is one of the major determinants of your interest rate, is extremely important when shopping for a new mortgage. Unfortunately, while in a credit card debt consolidation program, your credit is typically hurt.

Next, the amount of equity you have in your home (or its inverse - the loan to value or LTV). The ways to build equity are to either pay down your mortgage over time or to build equity by your home appreciating. A good rule of thumb is to try to keep your loan to value below 80%.

The third big variable is your debt to income ratio, or DTI. Debt to income is taken as a measure of your ability to comfortably make payments on the mortgage with your cash flow. Most lenders look at combined DTI, so they look at the percent of your income that goes to debt payments (including mortgage, auto loans, credit cards, etc) to make sure that you can afford the loan. Some borrowers will allow stated income loans, where income is not formally verified, although given what has happened with defaults in subprime, it is less likely than ever to get approved for a high DTI stated income loan.

As I mentioned before, you need to shop around with different lenders and brokers to find the loan that best suits your needs. I encourage you to start your search by visiting the Bills.com Home Refinance Resources page at http://www.bills.com/home-refinance where you will find a wealth of information about home refinance programs. If you enter your contact information in the Bills.com Savings Center at the top of the page, we can have several pre-screened mortgage brokers contact you to discuss the options available to you.

If you cannot refi today, there is always a chance that you could build equity over time if your home appreciates or if you pay down debt.

I wish you the best of luck. I hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

www.Bills.com