Subprime Mortgages And The Refinancing Boom

There are more than 19,​000 mortgage companies in​ the​ U.S. and some of​ the​ largest and most reputable of​ them specialize in​ subprime mortgage refinancing.

Steven Frank,​ Senior Vice President of​ Marketing at​ FlexPoint Funding identifies a​ subprime borrower as​ “someone with a​ FICO score below 620. He or​ she will pay between 1.5% and 2% higher interest for a​ mortgage,​ but there is​ no shortage of​ money or​ willing lenders in​ the​ subprime mortgage market.”

What trends do you​ see in​ the​ subprime mortgage market for 2018 and beyond?

Steve: We went through the​ biggest refinancing boom in​ history from mid 2002 through September of​ 2018. as​ many as​ 80% of​ Americans refinanced their homes during that time. Interest rates on​ adjustable rate loans dropped to​ under 4% during the​ boom with some homeowners opting for fixed rates as​ low as​ 5%.

Now both fixed and adjustable are back around 6.5% and will probably reach 7% for an​ A-grade 30-year fixed mortgage and 9% for a​ subprime mortgage by the​ end of​ 2018. the​ rate of​ appreciation is​ a​ more normal 6% - 12% annually. a​ typical home in​ most parts of​ the​ country stays on​ the​ market about six months,​ which means it’s a​ balanced market favoring neither buyers nor sellers.

What type of​ mortgage would you​ recommend for subprime borrowers?

Steve: Most subprime borrowers won’t qualify for a​ second mortgage or​ a​ home equity line of​ credit. They will have to​ refinance their first mortgage if​ they want to​ cash out some of​ their equity. Depending on​ their personal situation,​ a​ homeowner may be able to​ borrow up to​ 95% LTV (loan to​ value). More likely,​ it​ will be in​ the​ 75%-85% range. There are very few 125% LTV mortgages anymore,​ and subprime borrowers won’t qualify for these.

Subprime borrowers should work with a​ company that understands their particular needs; one that sees more than their past problems and that specializes in​ flexible,​ affordable mortgage solutions.

Mortgage Refinancing Advice

Check your credit - According to​ the​ government loan agency,​ Freddie Mac,​ up to​ 15% of​ subprime borrowers have credit scores that qualify them for traditional loans. Don’t settle for subprime rates if​ you​ can get prime-rate mortgage refinancing.

Watch your costs - Interest rates won’t vary much among subprime mortgages,​ however,​ there are some aspects of​ the​ loan structure that will impact the​ bottom line,​ such as:
- length of​ the​ mortgage term; 10,​ 15 or​ 30 years
- if​ it​ is​ a​ fixed-rate loan or​ an​ adjustable-rate loan
- whether any points have to​ be paid ( a​ “point” equals one percent of​ the​ loan)
- what kind of​ processing fees and closing costs are required

Look for good customer service - a​ good lender will walk potential borrowers through the​ application process,​ verifying personal information and making sure all the​ terms of​ the​ loan are understood. the​ lender will also recommend whether to​ lock in​ an​ interest rate during the​ processing phase or​ let the​ rate float until the​ closing.

Get a​ free quote - Prospective borrowers looking for refinancing can take advantage of​ sites like Bad Credit Mortgage Refinancing Now.

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