Top Tips to a Bad Credit Mortgage Refinance

Even if you have bad credit, it’s still possible to get a home mortgage refinance. The lending market isn’t quite what it used to be, and loans aren’t quite as easy to get as they once were. If you are willing to do a little more work you too can get a loan, regardless of your current credit situation.

If you have a credit score under 620, you’re probably looking at dealing with the sub prime market. The sub prime market has been rocked in 2007 with tons of news of lenders going out of business or scaling back their lending operations significantly.

What you’ll find is that the sub prime market still exists, and it is possible to still get a loan if you are able to meet their requirements. Gone are the days of nothing down loans in the sub prime market.

Sub Prime Mortgages: The Disadvantages

Even though you can get a sub prime loan, it doesn’t mean that you should. There are some disadvantages of getting a sub prime loan, and you should weigh the risks versus the rewards.

As you would expect sub prime loans come with higher rates of interest than normal mortgages. You can expect to pay between half a percentage point and 3 percentage points above what a prime borrower would pay. That means on a $200,000 mortgage you could pay in excess of $400 a month more. Also many sub prime loans are adjustable, which means that the rates can change over time, and typically they change towards higher payments rather than lower payments.

Many homeowners find themselves after a few adjustments of their mortgage, paying almost double what the introductory rate was. Making it almost impossible to keep current with their payments.

Many sub prime mortgages are also saddled with prepayment penalties. What that means is that if you sell your home or get a refinance within the first few years of the mortgage, you could have to pay a penalty to the lender of up to 4% of the mortgage amount. This isn’t as much of an issue if you plan on staying in your house, but sometimes things change.

Another option for many borrowers with credit issues is the FHA mortgage. The FHA mortgage is a mortgage that is backed by the US government. It offers a significantly different choice from the other sub prime mortgages. There are higher paperwork requirements which is about it’s only issue. The interest rates are comparable to prime rates, and they typically don’t have prepayment penalties.

Many borrowers could benefit from working on their credit, with a little bit of work and a little bit of time you could pull your credit up to qualify for a prime mortgage. Your credit doesn’t have to hold you back any longer. Bureau For Credit Repair can help repair bad credit for anyone.

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