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.
Jansen Drake is affiliated with 1st Metropolitan Mortgage, A Georgia Residential Mortgage Licensee 15506. For free consultation and a copy of The Certified Guide to Credit Scoring, call Jansen at 678-388-1755 or go to http://www.catquickloans.com
Your credit history is important; in fact, in this day... Read More
Have you ever looked at your credit card statement and... Read More
Ok, let's face it, everybody hates high credit card rates,... Read More
1. Choosing A new credit cardThere are many reasons for... Read More
Whether or not you receive a loan and what interest... Read More
Not everyone has a positive experience with credit counseling. Potential... Read More
By Federal law, you are entitled to one free credit... Read More
The three major credit bureaus, Experian, Equifax and Trans Union... Read More
Credit Scores That HurtIs your credit score being held against... Read More
Most consumers are aware that there are companies that keep... Read More
About Search Entries:Every time a lender checks your credit history... Read More
How many of you bank, shop, or transact other business... Read More
Do you have enormous credit card debt? You are certainly... Read More
Credit needed for real estate mortgage financing differs from credit... Read More
Getting your first credit card is a big deal and... Read More
Fact: Over 150 million Americans have credit report with the... Read More
A credit report is more than just a snapshot of... Read More
As a consumer you've learned the importance of establishing a... Read More
For those of us who know how to use them... Read More
What are inquiries?When you apply for credit the creditor or... Read More
There are millions of consumer credit reports on file from... Read More
If you intend to apply for a loan, you need... Read More
Creditors will measure your credit rating based on the following... Read More
How to Repair a Bad Credit Rating?The Right Way!If you... Read More
Your credit file may not reflect all your credit accounts.... Read More
Credit scores are the most important aspect that determines your... Read More
Bad Debt IdentificationIdentifying bad debt is not as easy as... Read More
If you've ever applied for a credit card or loan,... Read More
As identity theft becomes more prevalent, the need to regularly... Read More
It's not as hard as you think to raise credit... Read More
Making Your Credit Rating Work For YouOne of the basics... Read More
We spend money every single day on many different types... Read More
Using a credit card wisely is an important step in... Read More
Get your credit report online for FREE. Many financial advisors... Read More
I've got some very important info I want you to... Read More
Lenders are quite fussy about what they like to see... Read More
Mark and Beth, a young married couple in their twenties,... Read More
What FACTA means is that if you, as an individual,... Read More
In my previous article "Establishing Credit ? What You Need... Read More
What is Credit? Credit is money granted by a lender... Read More
Bank robbery has grown to become a huge problem in... Read More
Making Your Credit Rating Work For YouOne of the basics... Read More
Moving money from credit card to credit card to take... Read More
Here's a dirty secret, today's "non profit credit counselors" are... Read More
Help! I've Been Turned DownYou received an envelope in the... Read More
With today's credit card companies, there are many opportunities to... Read More
"I think money was stolen from my card" or "I... Read More
Getting worried that one of your clients, customers or patients... Read More
For people with a spotty credit history or bad credit,... Read More
You hear people talk about credit reports all the time... Read More
You've just received a "pre-approved" credit card offer in your... Read More
Why do some people get offers for pre-approved credit cards... Read More
Credit Counseling and bankruptcy are both ways to relieve the... Read More
There is no end to the amount of pain that... Read More
With all my bills who would possibly want my credit?... Read More
Clean Credit Reports, your credit report contains information about where... Read More
Let's be crystal clear, right up front. Paying someone to... Read More
You've probably heard the term credit scoring. You may have... Read More
Your personal credit file is separated from those with the... Read More
A check can be considered bad if it is bogus... Read More
A "rate tart" is someone who switches from one zero... Read More
Most consumers are aware that there are companies that keep... Read More
Debt management programs can be of real help for people... Read More
Consumers often have the first credit card that they ever... Read More
Some credit cards offer a cash advance option. But how... Read More
WHAT IS HIRE PURCHASE/CONDITIONAL SALE?Although people often talk about "buying... Read More
Credit |