California Refinance - Its still not to late for California home owners to refinance. A home refinance loan now may assist homeowners in lowering their current rate (and payments) as well as getting the cash out they need for debt consolidation, home improvement, or any other purpose.With the recent escalation of home values in most parts of California, homeowners are finding that the equity in their home is the best way to access needed cash. Many California homeowners even leverage equity for investment purposes.
In many ways, there's never been a better time to refinance in CA, especially if you have an adjustable rate mortgage which is going to begin adjusting outside of the fixed period within the next 3months or longer than that. Low fixed rates are still available for borrowers of all credit types.
Refinancing in California has proven to be a solid way to use your equity to reduce the interest you are paying. Due to fantastic appreciation, homeowners have been able to consolidate high rate credit cards, payoff student loans, and payoff cars.
Poor Credit Loans - Poor credit loans are loans where the borrower has had some problems with their credit and cant qualify for a conforming loan.
Do not stay in a poor credit loan for a long period of time. As time goes by, with better repayment behavior, you can refinance into a loan with better terms in a relatively short amount of time. Contact a mortgage professional every 6 months to have him/her evaluate your credit scores and your current mortgage situation.
Poor Credit Loans come with higher interest rates and usually always come with a 2 or 3 yr pre payment penalty.
The pre pay penalty that may be assigned to your loan is a protection to the lending institution. In addition to the higher interest rate and fees, the lender assigns a pre pay penalty on the loan to ensure they make a return on their investment. The pre pay penalty can be bought out usually with a fee.
To offset the poor credit lenders require a higher intrest rate than on a conforming loans.
There are loan programs available specifically for borrowers with poor credit, but there are often extreme limitations that may keep the borrower from being able to qualify. For example, with a 475 fico score, you may be able to qualify for a loan, but only for 70% of the value of the home. This would mean that you would have to come up with a 30% down payment if you are purchasing the home. For most borrowers, this would prevent them from being able to buy the home.
Poor Credit Loans are available to consumers that fit into a fico score bracket starting as low as 475. Lenders view mortgage history and consumer credit as a part of the approval process for most poor credit loan situations. LTV or (Loan to Value) is also a factor in the approval process of a poor credit loan. Lending institutions limit the LTV to a 70% quailfying percentage, your appraised value or equity position in your home determines the LTV. Good mortgage history, consumer credit, and LTV are the 3 keys in the loan process which will help you qualify for a refinance or purchase of home.
In many cases, lenders will waive the pre pay penalty if the borrower will accept a slightly higher interest rate.
The loans are usually 2-3 year adjustable rate mortgage to keep the payments at a reasonable amount. The rationale behind this is to refinance you in 2-3 years to get you into a better situation.
These types of loans can give you the chance to clean up your credit and give you the leverage needed to avoid bankruptcy. They also provide the opportunity to pay off back child support, late payments, and supply the cash needed for home improvements.
Lenders charge more points and higher interest rates to those with poor credit. Loans to borrowers with poor credit carry far more risk and lenders deserve compensation for this risk. Borrowers with good credit should not let themselves enter into a loan agreement where they pay points and rates based on a bad credit loan. One national company recently filed bankruptcy to protect themselves from litigation on fraudulent loan practices.
Lenders make a clear distinction between Poor Credit profile and No Credit profile. No Credit merely means the borrower has not had a history of using credit. A person with Poor Credit/Bad Credit profile has demonstrated a pattern of mishandling credit.
Can I get a loan with NO credit? - Yes! Many programs are available for people with no credit scores. Lets say you are the type of person that likes to pay cash for everything, and believe me there are plenty of people just like you out there. You go to your bank and they tell you they cant help you because you have no credit. Remember the old quote that says, "its better to have bad credit than no credit at all"? Well thats not true anymore, more and more lenders have programs that allow for non-traditional credit. If youve paid rent, insurance, electricity etc., and have paid on time for the past year, you can purchase your own home. The number of non-traditional trade lines you need varies by lender, but its generally three to four. Some lenders allow secondary stated income, and boarder income for qualifying purposes.
With no established credit history, you will be considered a higher risk because lenders feel it is important to see how you have handled credit obligations in the past.
However, there are also numerous lenders that more than willing to lend 100%
Alternative credit can be generated from cancelled checks or receipts of cash payments. When qualifying for mortgage financing, it will be necessary to have an average of twelve months of payment history to establish a payment record.
No Problem, no credit loans are available in many forms and fashions. The easiest no credit program generally has a 35% down payment and a higher than average interest rate. There are also lenders who will use utility bills, phone bills, and numerous other verifiable payments as credit worthy accounts. They will give your on time payments a credit worthy value to suite their needs. Often it is just a case of being able to verify that you pay your bills on time and having some form of down payment ranging from 10% to 35% of the property value.
No credit loans are certainly available. Granted they are at a bit higher of an interest rate. But these loans will get you in the home you want. Once you have had a few mortgage payments under your belt you will find you qualify for more traditional programs.
Besides showing proof of alternative credit through bills and canceled checks, you can call any of the companies you pay a monthly bill to and obtain a Letter of Good Standing, or a Good Credit Letter, each company has different names and formats for these types of letters. Simply call the customer service number and tell the person what you are looking for, a letter stating you have had an account with them for X number of years, and that you make payments on time every month.
As far as banks are concerned, a loan applicant with no credit history is not the same as one with a bad credit profile. A mortgage applicant with bad credit has demonstrated that he has a pattern of mismanaging his financial obligations. An applicant with no credit history simply means he has not used credit, which is not indicative of the applicant's willingness and ability or the lack thereof to meet his debt obligations.
You can get a conforming loan with no credit if you have established proper reserves. If you show that you have a savings history you may be able to get away with 3-5% down for your first home with no credit.
Should you refinance? - There is an old real estate mortgage rule, you should only refinance if your new interest rate is at least two points lower? That may have been true years ago, but with refinancing dropping in cost over the last few years, its never the wrong time to think about a new loan. Refinancing has a number of benefits that often make it worth the up-front expenditure many times over.
One of the best reasons to refinance your mortgage is to consolidate high interest rate credit card debts into one low monthly payment.
One point to always keep in mind when deciding whether to refinace. In almost every instance, there is never a less expensive way to borrow money than to borrow it against your principal residence on a first mortgage transaction.
For instance, if you are able to drop your rate from say 6.5% to 6%, that is only one half of a percent. Do you think it's worth it. Most people say no but let's do the math for just a moment. On a 150K loan amount the difference in your payment would be $49. Doesn't seem like that much but over 10 years that would save you $7,489. And if you put that extra cash in a growth fund for the same amount of time only getting 8% return on your money you would have saved an additional $9,100. Now you see why it might make sense to refinance now.
It's important to talk to your CPA about the refinance. There can be significant tax advantages that you should be made aware of before choosing which loan program to take.
When consolidating debt it is common to save hundreds per month. You must also take into consideration the interest rates and the amount of time that you would have paid the original debt off.
These are all things that your mortgage professional will be able to help you with.
Two other important points to consider:
*Does the state where the real estate resides have any intangible tax laws that would be assessed upon refinance?
*Is there a pre pay penalty still in effect that could mean 6 months of interest paid to the current lender if paid off in full?
If you are consolidating debt, you will want to consider your monthly savings that you will realize from a refinance. In many cases, borrowers can save a significant amount of money each month by using their equity to consolidate their debts.
Rate and Term refinancing: If you cannot afford to reduce the term of your loan (say 30 yr to a 15yr) you still can reduce the number of years to pay off your mortgage by using the savings from a rate reduction and returning it directly to the principal each month.
Contact us now for an analysis of all your debt and see how we can lower your total monthly payments!
Before you make the call or sign any papers, consider the following questions:
Do you plan to stay in your current home a while?
What is the total cost to refinance the loan?
What About Title Insurance on a Refinance?
How long will it take to recoup your out-of-pocket money and any expenses which are added to your principal balance?
If you are cashing out equity, what do you plan to do with the money?
Are you dealing with a reputable mortgage company?
A financially sound refinance should benefit the homeowner in one of three ways. Most refinance to lower costs in the long run, either as a result of lower monthly payments or by way of paying off the mortgage in less time. Some homeowners refinance to restructure their financing, for instance, to replace a balloon mortgage that becomes due, or to get out of a volatile adjustable rate mortgage. The third reason to refinance is to pull cash out from the equity of the home.
Often, people believe that since you pay off a 15 year mortgage twice as fast, the payments must be twice as much. In fact, a 15 year mortgage may only cost 15% more each month than a 30 year mortgage. This is because most of the money you are paying each month goes toward interest. You may be able to refinance into a lower rate, switch to a 15 year mortgage, and pay the same amount each month that you do now.
