If you are in need of refinancing your existing mortgage or taking out a second mortgage and are concerned that your credit score will prevent you from qualifying consider sub-prime options for your mortgage loan.
Mortgage lenders who offer sub-prime loans cater to people with bad credit. Traditional mortgage lenders specialize in low risk borrowers and mortgage products. These types of lenders will give you the best interest rates; however, they will not approve loans for individuals with poor credit ratings. Sub-prime mortgage loans are much easier to qualify for because the lenders will accept a higher amount of risk. You may be able to qualify for a 30 year fixed rate mortgage with little or no down payment; however you can expect to pay a premium for your interest rate. You will also have the option of an adjustable rate mortgage loan (ARM) which could get you a lower interest rate.
Because the lender is taking a greater risk by offering you a mortgage, these lenders will charge higher interest rates than traditional lenders. You might even be required to pay additional points up front and agree to more stringent terms. These terms could include early repayment penalties that could hinder your ability to refinance the mortgage loan.
Make sure you do your homework first and shop around before selecting a sub-prime lender. This will ensure you are getting the best deal available and keep you away from mortgage scam artists. The good news about selecting a sub-prime lender is that you will not be required to purchase private mortgage insurance (PMI). This insurance does nothing for the homeowner and can add hundreds of dollars to your monthly payment amount.
Before selecting a sub-prime lender discuss the fees involved with several brokers and lenders. Some lenders will charge a fee upfront. These fees you pay upfront do not guarantee you a good deal.