Someone has asked me this: 

I am applying for a refinance on my mortgage. I have creit problems. Never late on mortgage but have had some problems with creit cards. Score of 560. i have exsiting balances of about $6500.00 on those accounts. I am presently in an adj mortgage with a rate of 8.55, i want to get into a fixed rate. the broker i am dealing with wants to close on an initial loan of 9.65 with $1600 of closing costs with 2 months of not having to pay the mortgage. In that 2 months she wants me to pay off the $6500.00 with the money i take out of the loan with the idea this will raise my credit score, then do another refi before the first payment is do to get a lower rate, is this wise or possibly

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If you want to get into fixed rate, then based on your credit score, 9.65% with $1600 closing cost sounds reasonable. I know the interest is high because of your FICO. Do consider seriously into paying off the $6,500 of your credit card debt. If you can pay it off in 1 year, I say go for it, let the refinance wait because the long term fixed interest rate is still VERY low. Assuming your credit card APR is well above 12%, and your current mortgage interst is only 8.55% (technically lower because mortgage interest is deductible), so definitely pay off the $6,500.  

Why not do a cash-out refinance? Remember, each time you refinance, there is costs associated with it (closing cost). Is $1,600 of closing cost + bumping your mortgage interest rate to 9.65% worth it? Do not let your mortgage person run your credit report often as it actually lowers your score each time. Pay off the $6,500 and then refinance is my recommendation because of your FICO score.

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