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Refinancing a subprime mortgage is not an easy task and cannot be done quickly. The most important thing to remember is that there are options for those seeking to refinance a subprime mortgage. In order to make sure you qualify for the best rate, you should begin the refinancing process as soon as possible. It can take as long as six months to complete the process, so plan accordingly.
Knowing What You Owe
The first thing you will need to do is to find out exactly how much you will owe. You will also need to know the terms of your mortgage by finding out if there is a pre-payment penalty and when it expires. Once this information has been collected, it is a good idea to calculate the new monthly payment you will make at the adjusted interest rate. This will provide you with a workable time frame by which you can lay out the rest of your plan.
Review Your Credit Score
The next step is to review your credit. It is absolutely essential that you go through it with a fine tooth comb and correct all errors as expeditiously as possible to ensure you get the best rate that is available. If any errors are found, contact the creditor and ask for a correction. Even the slightest error can end up costing you a lot of money because it can bring down your FICO score. Your score is the benchmark that lenders use to weigh risk, the lower the score, the higher the rate.
Establish Savings and Employment History
The next step is your employment and savings pattern. A lender is usually looking for a stable employment and savings history. They are looking for a savings pattern. For example, if you put away $50.00 every month, for one year, this demonstrates you have the ability to save. Also, most lenders require a minimum 2 year employment history.
The next step is to get an appraisal on your home. Never rely on what other brokers or your neighbors tell you about the value of your home. Get a professional appraisal for your home that is both current and accurate so that you know exactly how much you will need to refinance. You can check to see if an appraiser is licensed online.
Review Your Options
The final step is to review all available options. It can be very difficult to refinance a subprime mortgage given all the damage it has done to the current housing industry, but those who are successful will be so because they knew all the options out there. This may mean taking advantage of government insured loans, called FHA loans.
It is also important to ask as many questions as possible. There are many no closing costs loan that will only increase your loan amount or interest rates, so be sure to ask how the costs are paid. This will let the bank know that you are concerned about your financial future.
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