Bad credit refinancing » Credit Card

How to Get Cash Back on a Refinance

admin — Sun, 23 May 2010 06:13:18 +0000

There are two ways to get cash out of a mortgage refinance. The first is a traditional cash-out refinance where the loan amount is higher than what it takes to pay off the previous mortgage balance based on a new appraisal of the home or an increase in the value of the home as it appreciates.

Typically this first method does require a lower loan to value ratio meaning that in order to take cash out, your home value or appraised value as compared to the loan value must be a certain percentage. Double check with your mortgage broker to determine what this number is.

The other way to get cash out of a mortgage refinance is to refinance your home at a higher interest rate and split what is known as the YSP or yield spread premium with your mortgage broker. The YSP is a rebate that the lender pays back to the mortgage broker for selling the interest rate above the par rate. In most cases, this is a 1% rebate on the loan amount for each “point” or quarter % that the rate is increased.

For example, on a loan amount of $300,000, the YSP on a interest rate of 6.25% for a 6% wholesale “par” rate would be a 1% rebate on the $300,000 or $3,000 due to the 1 point increase. So, if you wanted to get out $6,000 to pay off a credit card or something like that, you could (in theory) take that higher percentage rate of 6.5% using the same numbers from above and get back the $6,000. This will typically cost you more than the 6.5% if you wanted to cover closing costs and assuming the mortgage broker is paid as well may cost you closer to 7%.

The danger of this is that you are stuck with this increased payment for the duration of the loan until you sell your home or refinance again. So, this works well if you know you won’t be in a home for a long period of time and also may work well if you have steady income a good credit score and the ability to qualify for another refinance in a few months (depending on the lender’s stipulations).

Be careful with this method and be sure to find a trustworthy mortgage broker to work with on this. It helps if the mortgage broker is familiar with this method of rebating back to the borrower. In most cases the broker can’t pay out any sort of referral reward to a 3rd party, but there are no problems with giving back to the borrower any or all of the YSP.

By: Brian G Armstrong

Bad Credit Refinancing Success Guide-What You Can Do To Improve Your Chances & Loan Options

admin — Mon, 08 Feb 2010 23:51:48 +0000

Unless you have shopped for a mortgage in the last 3-6 months, be ready for a rude awakening if you are seeking a lot cost effective alternatives for bad credit refinancing—over 70 bad credit lenders have gone bankrupt since the beginning of 2007 & many of the programs that once assisted for bad credit refinancing have been changed or discontinued altogether.

Although significant changes have been imposed to bad credit refinancing guidelines, there are number of things homeowners can do to improve their chances of getting a good deal on bad credit refinancing—consider the following before applying for a bad credit refinance mortgage:

1). Attempt to clear up any past due or outstanding amounts on any of your open revolving/installment accounts. By bringing any outstanding or past due amounts current, you will stop your FICO scores from dropping any further, potentially improve your credit scores (if you are making significant changes to the outstanding balance to available credit ratio), potentially improve your DTI (debt to income) ratio for loan qualification and hopefully demonstrate to the your future lender that you are an “honorable” credit risk worthy of consideration.

2). Attempt to pay down the outstanding balances on any of your open revolving/installment accounts. By reducing your outstanding credit debt, you have the opportunity to increase your scores, improve your DTI ratio and increase your chances of meeting the front end/back end ratio guideline requirements subscribed to by most lenders. Making any contribution to debt reduction will have a positive effect on the issues outlined above, but to bring about significant and dramatic change, one should strive to reduce their overall outstanding balance to available credit ratio to 30-35% (example—if you have a credit card with a credit limit of $1000 with an existing balance of $600, your current outstanding balance to available credit ratio would be 60—in this case, you would need to make a payment of $300 to bring about the desired effects to your credit score and DTI ratio).

3). Accelerate the payoff of debt. Aside from the residual benefits you would receive to your credit score and DTI ratio (as outlined above), the added benefit to an accelerated debt reduction plan is an increased purchasing power (with less debt, you could afford to allocate more to housing).

4). Invest time or money (or both) in credit repair. Did you know that according to recent surveys, 1 out of 4 credit reports contain errors—these types of errors could be on your credit report and could potentially be affecting your credit score. Review a recent copy of your credit report long before you consider bad credit refinancing—check it for accuracy, omissions or falsities. If you should find problems, dispute them immediately—dispute submission & resolution can be done by yourself, online or outsourced to a third party. Don’t let wrong information on your credit report give the “wrong” impression to your future lender.

5). Adopt a good credit score. Did you know there is a simple way to get a better credit score, that requires a fraction of the time, effort or money used in some of the strategies outlined above? Become an authorized user. Ask a family member, relative or close friend (that has credit accounts that are both in good standing & at least 2 years old) to add you to their account as an authorized user. By doing so, you will “adopt” the payment history, credit history and good standing of this credit reference and your scores will improve because of it.

6). If you have been employed by the same company for more then two years and are considering a job change, stay put until after the refinance is done. Most conventional loan programs require 2 years of steady employment to be considered eligible—although there are programs that will overlook this matter, the terms and or conditions will be less desirable when compared to those offerings made to individuals with steady employment histories.

7). Don’t make any major purchases (like buy a new car) or add new debt to your credit accounts until after the refinance is done. Believe it or not, a lot of loans fail to materialize because of this—adding new debt effects your DTI ratio and will reduce the mortgage amount you can afford in the eyes of your future lender. For those that don’t have the time, money or inclination to undertake the task of implementing one of the above strategies, there are two more strategies for you:

8). Review loan programs that don’t base their rates/terms on your credit score.

9). Review programs that allow non-owner occupied co-borrowers. Despite all the changes in the lending industry, there are still good loans for those interested in bad credit refinancing.

Programs containing the following features/benefits:

- Not predicated on your credit score (this program has assisted with the bad credit refinancing of homeowners with FICO scores as low as 400—this program can even be used by those that have no credit scores).

- Allow you to refinance up to 95% of the current value of your home.

- Don’t require all collection accounts/liens to be paid off, funds to close can be gifted from a relative, family member or friend or granted by using a down payment assistance grant from a non-profit organization.

- Can finance the cost of energy efficiency improvements without the need for additional qualification.

- Tolerant to derogatory credit and past credit problems.

This program also allows for the use of a non-owner occupied co-borrower (that has a better credit history, score, DTI ratio) to go on the mortgage with you to assist you with in qualifying you for a better mortgage/lower interest rate/a more desirable loan program.

By: H. Scott Miller

Bad Credit Refinance Options

admin — Wed, 25 Nov 2009 07:10:06 +0000

Benefit

Refinance opportunities for people with challenging credit come in two main areas:

mortgage lendershard money lenders New Loan Options One of the most critical factors helping someone with bad credit is equity in the property.

If there is enough equity in a property then lenders will look much more favorably on a borrower with bad credit. For example. if the property is worth $300,000 and the mortgage is for $150,000 the borrower will have many lenders looking at their loan favorably.

Some lenders have not required a credit score if there is enough equity in a property (this is when a person owns more than 40% of the value of the property).

Hard Money Lenders

Hard money lenders offer loans for people who can’t be approved by regular lenders. People turn to hard money lenders because of the speed of their decisions and their flexibility. They can look beyond credit situations and look at the bigger picture. Hard money lenders usually also require a lot of equity.

Co-Borrowers

Some borrowers choose to include a new co-borrower on their application who has a higher credit rating. A borrower who is on a loan application but who does not live in the property is known as a “non-resident co borrower”. Some lenders allow this, and some lenders will not. It also depends on what type of loan the borrower is looking for.

Often times a lender will figure out a borrower’s debt burden after their credit card and other debt is paid off through a refinance.

By: Ben Afzal