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1st And 2nd Mortgage Refinance Loan
Refinancing a first and second mortgage requires some extra
considerations. Depending on your equity, you may find that
combining the two mortgages results in a higher interest rate.
You may also find that you have to carry PMI with the...
Subprime Mortgage Lenders - Sub-Prime Loans Now Available Through Traditional Lenders
Sub-prime loans are becoming more readily available through
traditional lenders. Even with a bankruptcy or foreclose in your
credit history, you can still find financing for the purchase of
your home. The key to sub-prime mortgages is to do your...
Thoughts On Securing A Bad Credit Mortgage
Over spending, the endless nights of partying, eating out and more or less buying everything on a whim, has most likely put a dent in your financial situation and will affect how you live your life for years to come. Clearly, the best option is to...
Why Are Mortgage Notes Discounted Anyway?
When real estate note brokers purchase partially paid notes, they pay the note holder a discounted price after factoring in the time value of money, the payer history, and property condition. If there is still a significant period of time left...
Your Mortgage Rate Lock - Don't Let It Slip Away
It's a great feeling to know that you have locked your interest
rate. You can now close your dream home with the payment you can
afford. No worries about a volatile market. However, it is
important that you read and completely understand the...
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A Qualified Mortgage Consultant Can Help Boost Credit Scores
Consumers interested in purchasing or refinancing a home will pay an interest rate based on current market conditions and their ability to pay back the loan. The borrower’s income and debt ratios are taken into consideration by the lender, as well as the predictability factor provided by credit scoring. It’s important to have a mortgage professional in your corner that has a keen eye for solutions to improving credit scores in an effort to get the best interest rate possible.
Interest rates associated with various loan programs are broken down into schedules based on credit score ratings. While each lender has its own guidelines, it’s safe to assume that as the consumer’s credit score goes down, interest rates will go up.
A borrower with an outstanding credit rating will get what is called an A-paper loan. This type of borrower is rewarded with a lower interest rate because they have a proven track record of using credit sensibly and paying their bills on time.
Loans designed for consumers with less-than-perfect credit – sometimes referred to as “sub-prime” – can range anywhere from A-minus, B-paper, C-paper or D-paper loans.
If you have already taken out a mortgage loan with a higher interest rate because your credit score was a little under par, you will really appreciate the value in doing a little work to improve your credit score. Refinancing from a D-paper loan to a B-paper classification can save literally thousands of dollars in financing fees over time, even though the B-paper loan is still considered sub-prime.
A qualified mortgage consultant will guide you through the nuances of the process of improving your credit score to refinance and save money. First and foremost, he or she will want to review the terms of the existing mortgage loan to determine if you have a pre-payment penalty clause written into your contract. In general terms, that means that if you sell the home or try to refinance before the pre-payment penalty expires and you have not already paid off 20 percent of the original loan amount, you will most likely have to
pay a 3 percent fee back to the lender to compensate for the high risk and high costs incurred to provide that financing.
Next, you should obtain free copies of your credit reports from www.annualcreditreport.com and start working on improving the credit score six months prior to the expiration date on your existing pre-payment penalty.
There are five factors that make up the credit score and your mortgage consultant can coach you through some basic strategies to improve your credit score. This means very conservative use of credit cards, paying off debt as much as possible and not applying for additional credit cards unless you will benefit from such action. You will want to verify that negative items you have paid off are being removed from your credit report, and that good credit history is being reported to all three bureaus. You’ll also want to dispute any errors that appear on your credit reports and seek to have those removed entirely.
Once your credit score improves, it’s time to refinance at a better interest rate. Your mortgage professional should look for a program that carries no more than a two-year prepayment penalty so you can continue to refinance as your credit score increases. You can repeat this process until you reach A-paper status and secure the best interest rate available.
This is a strategy that also works well for first time home buyers who do not have enough credit history under their belt to get an A-paper loan at the time of purchase. The important thing is to work with a mortgage consultant who can give you a roadmap to follow and a strategy for success in building personal wealth.
About the Author
Mical Johnson is affiliated with Rock Financial, Inc., a Licensed Correspondent Mortgage Lender, Florida Department of Finance. Mr. Johnson hosts Home Buyer’s Seminars which are open to the public each month in the TampaBay area in Florida. To obtain a free copy of Mr. Johnson’s Home Buyer Handbook contact him at www.TampaMortgageGuy.com He is also a contributing author at www.Debt-Free-Personal-Finance.com
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