Poor Credit? Get a Sub-Prime Mortgage Now, and Refinance to a Conventional Mortgage Later

There are great mortgage loans for people with poor credit, and yes, you can still save thousands of dollars. In order to receive preferential treatment for mortgage professionals, you'll need a credit score of 680 or better (this is considered A credit). If you have a score that is less than 600, you'll fall into a sub-prime loan category. Now, you'll need to get creative, in order to get your mortgage and not lose a fortune.

A sub prime lender will offer you virtually any type of loan that a conventional lender will offer, but you'll pay a much higher interest rate, as a risk premium. In other words, these lenders consider people with low credit scores risky borrowers, because they may have some poor payment history. Lenders like people who pay all their bills on time, even though it is not at all uncommon for people to occasionally miss a payment for one reason or another. So, the sub prime, or non-conforming, or niche, lender says, "We'll take the risk, but we want to make a lot more money, in order to do it." Don't worry. You can get it done, and improve your situation to refinance at a better rate later.

Let's assume you have poor credit, and you want to purchase a house for $100,000. You also have only five percent to put toward a down payment. You bring a twofold problem to the lender ? poor credit and a very high loan-to-value, or LTV. You need to borrow $95,000 on a $100,000 home, so your LTV is 95%. As a general rule, lenders like purchasers to bring 10 to 20 percent of their own money to the table, again lowering the risk for the lender; they feel that the more money a borrower has in a deal, the less likely she is to default. So, your mortgage professional will find his best sub-prime lender, and take your application to him.

Now, if your debt-to-income ratio (amount you owe monthly vs. gross income monthly) is 50% or less, and your credit score is above 500, you'll likely get your $95,000 loan. Your interest rate, however, will be between 10% and 12%, creating a very large monthly mortgage payment. So, how are you going to win the mortgage game, in this case? You have two options.

First, you can improve the loan by reducing the LTV. In other words, instead of taking a loan at 95% loan-to-value, you apply for a first mortgage of $80,000 (80% LTV) and a second mortgage of $15,000 (15% LTV). Here's how you save money. Instead of borrowing $95,000 at, let's say, 12%, with a payment of $977, not including taxes and insurance, you have a loan for $80,000 at 8.75%, for a payment of $629. Your second mortgage is at 13%, with a monthly payment of $166. Now, your combined monthly mortgage payments with two loans are $795, saving you $182 monthly over the first mortgage at 12% and $2,184 each year.

The second option is to take an adjustable rate mortgage, which offers great savings, just like conventional loans. If you take a 2-year ARM, which sub prime lenders offer, you might be able to get a rate of 7% or 8%, instead of the 10% you'd likely get on a 30-year fixed loan. You might also talk to your mortgage professional about combining option one and two, and taking an ARM on your first mortgage at 80% LTV and still taking a second mortgage for $15,000. This could save you even more.

Get a free mortgage course to learn more.

Mark Barnes is an investment real estate and real estate finance expert. Get his free mortgage finance course at http://www.winningthemortgagegame.com. Mark is also the author of the new novel, The League, a shocking, sports-related conspiracy. Learn more about his suspense thriller at http://www.sportsnovels.com.

---

Real Estate Finance Strategy that Few People Consider

If you are considering a new home loan anytime soon,... Read More

Refinancing Your Home Mortgage - Get Up To 125% Cash From Your Homes Value

With the low interest rates being offered by lenders today,... Read More

New Home Loan - 3 Tips To Speed Up The Mortgage Loan Approval Process

Imagine this: you've found the perfect house, and feel lucky... Read More

Before You Buy

Before you start looking for a home, figure out what... Read More

What Exactly Is A Reverse Mortgage And How Does It Work?

A reverse mortgage is a certain loan that allows the... Read More

Jacksonville Florida Real Estate Mortgage Home Loans - Get the Best Rate Everytime

There are hundreds of mortgage companies in the Jacksonville real... Read More

Mortgage-Refinance Treachery: Avoid Mortgage Bankers and Brokers Biggest Trick -- The Sales Pitch

What the average homeowner or home buyer fails to realize... Read More

Zero Down Mortgage Loans - Is 100% Financing a Good Idea and Can You Get Approved?

Are you wondering if you can get approved for a... Read More

Home Equity Can Create a Never-ending Money Cycle

What could you do with $10,000? Well, you can have... Read More

Homes, To B(uy) or Not to B(uy)

Whether you are just moving out on your own for... Read More

Sound Financial Standing Entails Capital Raising Remortgage

Raising capital is integral for growth and expansion of an... Read More

Mortgage Loan Most Bankers Wont Give May Be Exactly What You Need to Buy or Refinance Your Home

A few years ago, a loan officer who worked for... Read More

Refinance Mortgage Rate and Mortgage Rates

Refinance mortgage rate is the best rate available to qualified... Read More

How To Get The Best Home Equity Loan

Are you wondering how to get the best Home Equity... Read More

Home Mortgage Loan Pre-Approval Online ? Keys When Applying For A Mortgage Online

Applying online for a mortgage is very fast and easy.... Read More

Home Mortgages: Should You Apply Now?

If you're thinking about applying for a new mortgage or... Read More

How to Get Your Home Mortgage Loan

If you are thinking of purchasing a new home soon... Read More

Mortgage Prepayment Penalties - Just Say No

One of the most common terms found in a new... Read More

Understanding Mortgage Basics

As common as mortgages are, there are a surprisingly large... Read More

Selling Your Business Note

Before I go further, let me ask a question- if... Read More

Seniors Can Use a Reverse Mortgage to Fund Annuities, Investments, and Insurance Policies

For many seniors in or entering retirement, the prospect of... Read More

Home Equity Loan ? Good Choice for Luxury Purchases?

Home equity loans or lines of credit have increased dramatically... Read More

Where To Find The Best Rates For Your Mortgage?

As with all of my articles this will be based... Read More

Biweekly Mortgage

The biweekly mortgage has been around for years but with... Read More

Florida Refinance - Refinancing in Florida

The decision to buy a home in Florida can be... Read More

Need Mortgage? Alternative Finance Often Masks Predators, Who Want to Steal Your House

So, your bank had just turned you down for a... Read More

Should You Get an Interest-only Home Mortgage?

Before you consider taking out an interest-only mortgage, you should... Read More

How to Avoid Paying Mortgage Insurance

In today's world, a borrower should not be paying mortgage... Read More

Shopping for A Mortgage? Do Your Homework First

If you happen to be shopping around for a mortgage,... Read More

FHA Mortgage: When Your Downpayment is a Gift

There has been so much fraud discovered in the FHA... Read More

Mortgage Soup

Looking for home mortgage loans can get confusing with the... Read More

Mortgage Sales Hit Problems

The housing market has been buoyant over the past few... Read More

Save Time With a Bridge Loan

Why You Need a Bridge LoanYou have to move fast... Read More