In a perfect world everyone would have a 720 credit score and a trouble free credit history. Unfortunately we live in reality and the truth is that many home owners have less then perfect credit scores. While bad credit can make refinancing a home loan difficult getting a mortgage with bad credit is actually easier then you think.
The first thing you must determine is how bad your credit actually is. Knowing your credit score will help determine your loan options and save you the headache of having to apply for a mortgage only to be turned down.
Bad Credit Refinance Options
If your score is 600 or higher then you more then likely will be able to secure a good low fixed rate FHA mortgage. Keep in mind that FHA requires your last 12 months mortgage payments to have been paid on time and your debt to income ratios need to be at or around 42%. FHA will refinance up to 97% of the value of your home so it works well for people with little to no equity in their primary residence.
If your credit score is under 600 and not below 500 you really have no other option but to use a sub prime lender. although they have gotten a lot of bad press lately sub prime loans can help people refinance their homes when other lenders turn them away. However never under any circumstance take a sub prime adjustable mortgage and always opt for the fixed rate. Sub prime loans allow you to refinance with mortgage lates, open collections and many other derogatory credit situations.
However if your credit score is under 500 you have some serious work to do because even sub prime lenders will not lend to borrowers with credit scores under 500. At this credit score level you have two options. You can either invest some time and money into credit repair to improve your scores to the level where you can secure sub prime financing. The other option is for you to use a hard money lender. Hard money lenders typically have very high interest rates and loan fees and should only be used as a last resort. They also only typically lend up to 70% of your homes value so they may not be able to help everyone based on those equity requirements.
By: Darin Sewell
Posts Tagged ‘Sub Prime Loans’
Bad Credit Mortgage Refinancing Home Loan
February 2nd, 2010
Bad credit mortgage refinancing loans help borrowers with credit problems refinance an existing mortgage to either payoff debt or get cash out. If your credit is poor because of excessive credit card debt then bad credit refinancing is one of the best ways to improve your credit score.
Bad credit refinancing is typically for home owners who have credit scores under 620 and have late mortgage payment’s in the last 12 months. Sub prime lenders are the main source for these types of loans and many will lend to bad credit borrowers with a 30, 60 and even a 90 day late payment on record. Although the amount of equity you can borrow will be greatly reduced with the amount of late payments you have. Qualifying Credit scores for sub prime loans begin at 500 and go all the way up to 700, at a 500 credit score expect to be able to borrow 70-80% of your home appraised value. The higher your credit score the higher the Loan To Value you can borrow.
Many sub prime lenders offer 2 or 3 year Adjustable Rate Mortgages to bad credit borrowers, short term Adjustable mortgages are not a good idea for the bad credit borrower. The biggest drawback to an ARM is that if you should fail to improve you credit score and be unable to refinance, your payments will begin to rise when your adjustment period begins. The rise in payments can often be hundreds of dollars a month making your mortgage difficult to pay. When applying for a bad credit home loan It is best to stick with a fixed rate subprime mortgage, if you need a lower payment ask your mortgage broker about 40 year fixed rate subprime loans.
With the availability of subprime home loans bad credit refinancing can be a great way to improve your credit score, however when the wrong programs are chosen it can do just the opposite. Use a good reputable mortgage broker and always use common sense when shopping for your subprime home loan.
Learn More About Bad Credit Home loans
By: Darin Sewell
Minnesota Refinance Loans – Getting Approved for a Bad Credit Refinance
November 22nd, 2009
Almost anyone in Minnesota can qualify for a refinance loan. Even people who have a damaged credit history will find that there are plenty of lenders out there willing to work with them to refinance their Minnesota property.
Finding the Right Lender
Since there are so many lenders out there who are willing to handle your Minnesota refinance loan, the real challenge is finding the right one. If you have bad credit, your best bet will be to work with a lender who specializes in sub-prime loans. This type of lender will be familiar with bad credit refinances and will know where to go to get the best rate. You can research different lenders online and get instant quotes on rates and closing costs.
Understand the Refinance Loan
It is all too common in the sub-prime market for lenders to take advantage of borrowers who have poor credit. This is why it is so important for you to understand the Minnesota refinance loan that you choose. Read over all of the terms carefully. If you have an adjustable rate, make sure you know which index the rate will be adjusted by. If you have a balloon payment, make sure you know when the balloon will come due. Remember, your lender will answer every question you have. Take advantage of the fact and ask for clarification before signing any papers.
Scrutinize the Costs
If you have bad credit, you can expect to pay a higher rate. Currently, refinance loan rates in Minnesota average 5.5 percent on 15 year loans. The lower your credit score is, the more you can expect to pay. However, there is no reason for you to pay more than what is necessary. Get plenty of Minnesota refinance loan quotes so that you know you are receiving a fair rate.
By: Jane A. Hale