Refinance Home Mortgage Guide

Qualifying for a home equity loan with bad credit is not as difficult as you think. Many homeowners with poor credit think their credit will prevent them from qualifying for a loan. This is simply not true, especially when it comes to home equity loans. Home equity loans are secured by your home just like your primary mortgage, and are the perfect vehicle for rebuilding your credit.

Having poor credit means you will pay more for the financing on your home equity loan. It is especially important for homeowners with poor credit to shop around for the most competitive home equity loan from a variety of lenders. When you compare home equity loan offers compare all fees for the loans you consider, not just the interest rate or annual percentage rate. Depending on the type of home equity loan you choose you will be required to pay many of the same fees you paid when you took out your mortgage. These fees vary widely from one lender to the next, so it pays to shop around.

Home equity loans come in two varieties: second mortgage loans and home equity lines of credit. Both options have advantages and disadvantages depending on your financial situation and the reasons for borrowing equity. Because you have poor credit you can expect to pay a higher interest rate and lender fees than a borrower with good credit; however, this does not mean you will pay outlandish fees. This is why comparison shopping for the best loan is important. When you comparison shop from a variety of lenders you can easily spot the ones that are trying to take advantage of you with excessive fees and interest rates. You can learn more about your home equity loan options by registering for our free mortgage guidebook.

There are several options available for homeowners with home equity loans when it comes to refinancing. You can consolidate your primary and secondary mortgage into one monthly payment. Another option that could save you money is to refinance your home equity line of credit to a second mortgage. Choosing a second mortgage over a home equity line of credit will allow you to qualify for a lower fixed interest rate.

Should You Consolidate or Refinance Just One Loan?

If you are considering refinancing your equity line of credit, take a look at your primary mortgage. Depending on the terms and interest rate of your first mortgage you might find consolidating both mortgages would be in your best interest. By consolidating your home equity line of credit with your primary mortgage you could save money on closing costs and qualify for a lower interest rate.

If you are happy with your primary mortgage and already have an exceptional interest rate, consolidating may not be the best option. Compare loan estimates for consolidating and rolling your home equity line of credit into a second mortgage to determine which option is best for your financial situation. Once you have decided to go through with refinancing your loan, you need to compare loan offers from a variety of lenders and brokers to determine which lender is best for you.

If you need a specific payment amount to make ends meet with your budget you can adjust the term length of your new mortgage to lower the monthly payment amount. Even if you do not qualify for a lower interest rate you can still lower your payment amount significantly by choosing a mortgage with a longer term length. If your goal is to build equity in your home as quickly as possible, choosing a mortgage with a short term length will raise your payment amount, build equity faster, and possibly net you a lower interest rate. Fees and interest rates vary widely from one lender to the next so it is best to shop around to make sure you get the best deal on your new mortgage. You can learn more about your mortgage options including ways to avoid common homeowner mistakes by registering for a free mortgage guidebook.

Most traditional mortgage lenders require a twenty percent down payment to qualify for a loan. For many potential homeowners, this down payment is a barrier to homeownership. If you are a homeowner in this situation there are now loan programs available that can help you achieve your goal of homeownership. These loans are 80/20 mortgages; often referred to as piggy back loans.

How Does an 80/20 Mortgage Work?

80/20 loans are a relatively simple concept. These loans are typically handled by two lenders. Your primary mortgage will cover 80 percent of the purchase price and you will have a second “piggy-back” loan for the remaining 20 percent. The advantage of this type of mortgage is that you will not have to take out Private Mortgage Insurance to qualify. Private Mortgage Insurance can add hundreds of dollars to your monthly payment amount and does absolutely nothing to protect the homeowner.

How Do I Qualify for an 80/20 Mortgage Loan?

If you are considering purchasing your first home or currently carry Private Mortgage Insurance on your existing mortgage, you could benefit from an 80/20 loan. First time homebuyers benefit from 80/20 financing but rarely understand how to obtain this type of loan. Mortgage brokers can be an excellent resource for finding lenders that offer piggyback loans. The Internet is also an excellent tool for comparing loan offers from a variety of lenders that offer piggyback loans.

When you compare loan offers it is important to compare all aspects of the loans, not just the interest rates. Keep in mind that the interest rate you will qualify for on the piggyback loan will be higher than your primary mortgage because this lender assumes more risk. If you have credit problems an 80/20 loan can get you into a home and on track to rebuilding your credit. You can learn more about your 80/20 mortgage options, including common mistakes to avoid by registering for our free mortgage guidebook.

Bad credit mortgages lenders cater to homeowners with poor credit ratings and are often referred to as “sub-prime” mortgage lenders. Sub-prime lenders work with borrowers that traditional mortgage lenders will not. Before you apply for a bad credit mortgage there are several things you need to know to protect yourself.
The bad credit mortgage industry has grown from a small cottage industry to a significant part of the mortgage economy. One in four Americans today has poor credit for one reason or another. These borrowers do not qualify for traditional mortgage loans and have to pay higher interest rates and fees to qualify with a sub-prime mortgage lender.

Interest rates vary significantly from one lender to the next, especially with bad credit lenders. It is important to shop from a variety of lenders and mortgage brokers that specialize in bad credit loans; by doing so you will know what fair interest rates, terms, and fees are for a borrower in your financial situation. When you comparison shop correctly it is easy to spot mortgage lenders that are out to take advantage of borrowers with poor credit.

An important aspect of your new mortgage is that it must not have a prepayment penalty. Your goal for taking out a sub-prime mortgage should be to rebuild your credit. After you have 24 months of on-time payments under your belt you will have sufficient credit to refinance with a traditional mortgage lender for more competitive rates and terms. Choosing a mortgage with a prepayment penalty could cost you a significant amount of cash when you’re ready to refinance.

Beware mortgage lenders that encourage you to exaggerate your income or the state of your credit. If the lender ask you to sign blank or incomplete documents it is a sure sign of a dishonest mortgage lender. Predatory mortgage lenders try and structure their loans to make it impossible for you to repay. When you fall behind on the payments they will foreclose and take your home. You can learn more about your mortgage options and avoiding predatory mortgage lenders by registering for our free mortgage guidebook.