There are great mortgage loans for people with poor credit, and yes, you can still save thousands of dollars. In order to receive preferential treatment for mortgage professionals, you’ll need a credit score of 680 or better (this is considered A credit). If you have a score that is less than 600, you’ll fall into a sub-prime loan category. Now, you'll need to get creative, in order to get your mortgage and not lose a fortune.
A sub prime lender will offer you virtually any type of loan that a conventional lender will offer, but you’ll pay a much higher interest rate, as a risk premium. In other words, these lenders consider people with low credit scores risky borrowers, because they may have some poor payment history. Lenders like people who pay all their bills on time, even though it is not at all uncommon for people to occasionally miss a payment for one reason or another. So, the sub prime, or non-conforming, or niche, lender says, “We’ll take the risk, but we want to make a lot more money, in order to do it.” Don't worry. You can get it done, and improve your situation to refinance at a better rate later.
Let’s assume you have poor credit, and you want to purchase a house for $100,000. You also have only five percent to put toward a down payment. You bring a twofold problem to the lender – poor credit and a very high loan-to-value, or LTV. You need to borrow $95,000 on a $100,000 home, so your LTV is 95%. As a general rule, lenders like purchasers to bring 10 to 20 percent of their own money to the table, again lowering the risk for the lender; they feel that the more money a borrower has in a deal, the less likely she is to default. So, your mortgage professional will find his best sub-prime lender, and take your application to him.
Now, if your debt-to-income ratio (amount you owe monthly vs. gross income monthly) is 50% or less, and your credit score is above 500, you’ll likely get your $95,000 loan. Your interest rate, however, will be between 10% and 12%, creating a very large monthly mortgage payment. So, how are you going to win the mortgage game, in this case? You have two options.
First, you can improve the loan by reducing the LTV. In other words, instead of taking a loan at 95% loan-to-value, you apply for a
first mortgage of $80,000 (80% LTV) and a second mortgage of $15,000 (15% LTV). Here’s how you save money. Instead of borrowing $95,000 at, let’s say, 12%, with a payment of $977, not including taxes and insurance, you have a loan for $80,000 at 8.75%, for a payment of $629. Your second mortgage is at 13%, with a monthly payment of $166. Now, your combined monthly mortgage payments with two loans are $795, saving you $182 monthly over the first mortgage at 12% and $2,184 each year.
The second option is to take an adjustable rate mortgage, which offers great savings, just like conventional loans. If you take a 2-year ARM, which sub prime lenders offer, you might be able to get a rate of 7% or 8%, instead of the 10% you’d likely get on a 30-year fixed loan. You might also talk to your mortgage professional about combining option one and two, and taking an ARM on your first mortgage at 80% LTV and still taking a second mortgage for $15,000. This could save you even more.
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Article Source: http://EzineArticles.com/?expert=Mark_Barnes
Thursday, June 12, 2008
Poor Credit? Get a Sub-Prime Mortgage Now, and Refinance to a Conventional Mortgage Later
Texas Mortgage - Find Out The Best Mortgage With 100% Financing!
Mortgage is the process where the property owner (borrower) pledges the property and gets the finance assistance from the lender. The property is the security for payment of a debt.
Basics for Texas Mortgage
Selling or buying a home is one of the biggest tasks for may people. This complicated process can be done easily by the help of Texas Mortgage Company. Prepare yourself before you start to search for shopping a new home. This preparation will be helpful to avoid wastage of your valuable time and money.
Texas Mortgage Refinance
Do you think, your current mortgage company has put highest interest rate for your loan? Are you in need of refinance to merge existing loans? Do you need to extend your mortgage period? We are assisting you to get refinance for your property.
Reasons for refinance your mortgage:
* Interest rates should be lower than your original mortgage. The interest rates are even one percentage less than your current mortgage, you should look for refinance.
* Fixed rate mortgage is helpful to reduce your monthly payments.
* You want to reduce the mortgage period; the interest rate should be reduced.
* You want cash to improve your home; refinance will help finance assistance.
Washington Mortgage Brokers Association:
This brokers association will help to give the current interest rate as explained by the various lender's offer. The accurate information about the mortgage loans should be available for borrowers to choose better offer of loan. It should also come from more reliable source. This association will give the tips and ideas to buying a mortgage.
Ohio Mortgage Loans:
The Ohio Mortgage broker's directory provides all the lenders in the Ohio state. It also gives the best mortgage option as per your needs. You need to fill one online application form for mortgage; and best offers will come flowing to you. Ohio Mortgage brokers are one of the biggest lender networks in Ohio. The loan type depends on your financial position. This clearly explains about the refinance options as per your needs.
Your credit score, upfront cash and income level are the main factors to buy a mortgage. Texas Mortgage Company is providing 100% finance assistance to buy a home with mortgage. To avoid the foreclosed the property and maintain your ownership, you should collect all the relevant details about the mortgage before you buy a Mortgage loan.
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A Mortgage is a method of using property as security for the payment of a debt. Most mortgage lenders offer a variety of formats. Check out the Texas Mortgage Loan options.
Article Source: http://EzineArticles.com/?expert=James_Arther