If you’ve been thinking about refinancing your home mortgage loan but don’t think you’ll be able to take advantage of today’s low rates because of your credit, you might be surprised to learn how accessible low mortgage rates are.
While your credit score plays a factor in qualifying for a mortgage loan, getting the lowest mortgage rate and payment depends not on your credit history but how much about mortgage loans you know.
It’s true… learn the ropes and you’ll find that you qualify for a better mortgage rate than that snobbish neighbor on your block with their perfect credit rating. Here’s what you need to know in order to refinance your mortgage getting the lowest possible payment with less than ideal credit.
Just How Bad is Bad Credit?
There are limitations of course to how bad your credit can be in order to qualify for a traditional mortgage loan; assuming your credit score is not a barrier to loan approval your actual credit score is a non-issue. It doesn’t matter if your credit score is 650 or 750, once you’re approved your credit score has nothing to do with the mortgage rate you receive. What should you do if you cannot qualify for a traditional mortgage loan because of your credit? There are lenders that specialize in this type of home loan; even if you are unable to qualify for a traditional mortgage loan the strategies taught on this website can still save you thousands of dollars. What you need to know is that responsibility for setting your mortgage rate does not lie with the lender. So, if the mortgage lender doesn’t set your interest rate upon loan approval, who does?
Mortgage Interest Rates 101
It might surprise you to learn that the person responsible for determining your mortgage interest rate and ultimately whether or not you get a good deal or overpay is none other than your old friend the mortgage broker. You see, mortgage brokers work from daily lender rate sheets. These mortgage rate sheets quote interest rates for the same loans, with and without points. Keep in mind that a point is a fee you’ll pay to qualify for a specific mortgage rate and not all mortgage rates require paying points. In fact, some mortgage rate quotes actually create points for the broker, which is something you’ll want to avoid when refinancing. Remember that one point is 1.0% of your loan amount and the sweet spot that you’re looking for with your new mortgage is an interest rate that does not require cash out of your pocket or creates an “extra” commission for the person arranging your home loan.
The mortgage rate you’ll receive when refinancing your home loan depends on how well you can negotiate when shopping for the right person to arrange the mortgage. Negotiation not your thing? Don’t worry… it’s a lot easier than you think as long as you’re upfront with the mortgage brokers you contact. I’ve put together a very simple screening process you’ll learn about shortly to weed out mortgage brokers that take lender kickbacks and charge you junk fees.
If you take one thing away from this article in needs to be that the mortgage rate you qualify for has little to do with your credit score and is determined by the person you choose to arrange your home loan…
Because the person you choose to arrange your mortgage is paid by commission you can bet the home loan that gets them the biggest commission is not going to be the right home loan for your situation. So how does this commission I’m talking about affect your mortgage rate? Remember that I told you that lender rate sheets quote mortgage rates that either require or create points? The sweet spot in the middle is the mortgage rate that neither costs nor creates points for the broker. When you pay points in exchange for a lower mortgage rate the fee you’re paying is called a “discount point.” Conversely, when you unknowingly accept a higher than necessary mortgage rate when refinancing, points are created for the broker in the form of an unnecessary commission known as Yield Spread Premium.
Notice that I said “higher than necessary” mortgage rate creating an “unnecessary” commission for the broker. This isn’t to say that the mortgage broker should not be paid for their work; on the contrary, this is what the loan origination fee is for. The problem is that many mortgage brokers feel they are entitled not only to your origination fee, but also to Yield Spread Premium on the loan driving up your mortgage payment unnecessarily. (By the way you shouldn’t pay more than one percent for the loan origination fee.)
Shouldn’t You Just Avoid Refinancing With a Mortgage Broker?
At this point you might be saying to yourself “I already knew that mortgage brokers are shady… I’ll just avoid all this crap and refinance with my bank.” It makes sense right? Banks are direct lenders… refinance with a direct lender and you not only cut out the middleman but their commission also. The problem is that not only does your bank and every other “direct lender” under the sun take the same markup of your mortgage rate but thanks to a convenient loophole in disclosure laws your bank is not required to disclose their markup or profit margin on your loan. Banks simply do not give their customers par mortgage rates… ever. You cannot avoid working with a mortgage broker if you want the lowest possible rate and payment, bad credit or not.
It is possible to refinance your home with a par mortgage rate without a stellar credit rating and you don’t have to be a financial guru to pull it off. You can refinance your home without paying points or Yield Spread Premium on the loan, get the lowest payment and look like a hero to your family. All you need to do is find the right mortgage broker for the job.
You can learn more about a bad credit mortgage interest rate and refinancing your home loan without paying points or mortgage junk fees by registering for my Underground Mortgage Videos. Register today and you’ll get immediate access to the mortgage videos online without downloading anything to your computer.
Here’s a sample of what you’ll get when you register… The refinancing techniques in these free mortgage videos save the average homeowner $1000 per year.
Make sure to know the state of your finances before contacting your lender. Determine how much income you're bringing in each month, how much you're paying in bills and where you can cut costs. Just a tip!
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