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.
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By: Darin Sewell
Posts Tagged ‘Sub Prime Loans’
Bad Credit Mortgage Refinancing Home Loan
December 24th, 2009Minnesota Refinance Loans – Getting Approved for a Bad Credit Refinance
December 16th, 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