If you have bad credit, you can't afford to keep a mortgage with a high interest rate. If you work with the right lender, you can lower the cost of your loan and help your monthly budget. You can even get some or all of your equity in cash to pay off high-interest credit card debt. Subprime lenders can help you get a loan and get your credit back on track.
How to get your rates down
You can lower rates on a future refi loan even if you have bad credit. Fixed-rate mortgages have lower rates at first than adjustable-rate mortgages. Rates can often be locked in for two to seven years. After that, the rates will be based on an index fund, which means they may go up. But with most lenders, you can either lock in your rates sooner or switch to a different loan.
Some lenders will also cut your rates even more if you choose to pay automatically. Your mortgage payment is taken out of your checking account every month, so you don't have to worry about sending a check.
Comparing loan quotes is the best way to find low rates. Each lender will give you a different loan package with different rates and fees. Choose a loan based on who can give you the best deal overall. If you plan to keep the loan for at least seven years, you might want to pay a point or more to get a lower rate.
Rates to look out for
The best loan rates are for people with credit scores of 650 or more. On average, that loan rate goes up by one or two points for every 50-point drop. The closing costs are about the same as for a regular mortgage. When you get a subprime loan, you don't have to pay for private mortgage insurance, which is a plus.
Where To Find Subprime Lenders
Most companies that lend money now offer subprime loans to people with bad credit. A mortgage broker is a good place to start looking for a loan. Mark on your loan estimate form that you have bad credit, and they will put you in touch with several lenders who are willing to work with you.
You can also go straight to the sites of the lenders. Either look at their home page to see what the market rates are or ask for a quote. Be sure to write down the closing costs and fees as well. You also don't want to be surprised by early payment fees.
