This client would like a home loan refinancing package for his family home. He lives  in Redding California and as it turns out his credit rating is not fair, he does in fact have a bad credit rating.  There are several reasons for his bad credit rating .  There is the judgement issue the client indicated in his application, however he has also been slow at paying his credit card balances which also contributes to his bad credit rating. He did not mention this in his application.

The income level of this family appears to be sufficient to support a mortgage of the requested size, however he may not be able to qualify for a competitive interest rate. Most banks will only offer their lowest rates to individuals  who have excellent credit ratings. Consumers who have bad credit ratings for whatever reason usually must pay higher rates. We have illustrated this in the calculations at the bottom of this post to provide some idea of the impact.

Having a bad credit rating could cost this client as much as $170 more a month in monthly payments on his mortgage. This client should discuss some of the details surrounding his judgement with the bank and he should also pay more attention to paying his bills on time so that it does not negatively affect his credit rating.

In addition many homes have lost substantial amounts in terms of their value over the past 3 years. Although the client feels that he is protected based on when he originally purchased his home, the bank will require that the home be reappraised to establish it’s current value. This new value would then be used to calculate the new home loan refinancing limits for a new mortgage on his home. There will be an appraisal fee and processing fee that the client will need to pay for should he wish to proceed with his application.

As a result he may not receive approval for his application for home loan refinancing with this bad credit rating and possible reappraised value of his home. It will be a big disappointment to him and his family, however most banks are being very careful with approvals of refinancing and new mortgage home loans after what we all experienced in the last couple of years with the housing crisis and the economic down turn.

Home/Mortgage Loan Amount :: $200,000

Home Loan Application and Processing Speed (when do you need the funds):: Within the next month. We would like to add a pool to our backyard and update the landscaping around the back yard.

Do you currently have a mortgage? :: yes

Bank Name and Branch :: Redding Bank of Commerce, Churn Creed Road

What City/Town, State and County do you live in? :: Redding, California

Zip :: 96001

What is your employment field? :: Medical Field

Employment Position :: Hospital Administration

When are you paid? (monthly/weekly/biweekly):: biweekly

Your credit rating to be – excellent, fair, or bad? :: fair I think

How did you find us? :: local advertising and surfing on the net

How are you paid? (direct deposit/paper check):: Direct deposit

Gross Amount Per Paycheck ::  $3850

Do you agree to have this information published online, without your PRIVATE information of course? :: sure

Extra information here please (some detail):: We have lived in our home for the past five years and even after the recent housing market downturn, our home is still worth more than our mortgage. We were one of the lucky ones who bought before prices really sky rocketed. Currently it is valued at $400,000 and we have a mortgage of $125,000 on it. We would like to refinance this mortgage, increasing it to $200,000 and use the funds to add an in ground pool, sauna and hot tub to our back yard. We have plans for the entire yard to be re-landscaped after the pool etc have been installed.  We are really excited about this upgrade to our home and are anxious to get it started. As soon as financing is approved we will give the go ahead to the contractor to begin construction.

Note to Lender :: I work as a hospital administrator and have been at the local hospital for over 10 years.  My wife also works and has a stable job with a local law firm. Together we make over $100k in income. We have several debts including loans for two cars, several credit cards with balances which we will also consolidate when we refinance our mortgage.

My credit rating is fair, although perhaps you might even rate it lower than this. We had a disagreement with a local company concerning some work that was performed and withheld payment until such time the work was going to be completed to our satisfaction. It ended up in court with a judgement against us and of course the associated black mark against our credit rating.

All of this was quite stressful and I think in the end we are paying the price in several ways due to the poor work, and the judgement against us as well as the poor or bad credit rating marks that have been applied to us.  We have not missed a payment on our mortgage and pay all of our bills on time. We would like to proceed with our pool installation as soon as possible and would appreciate your quick review of our application.