About Subprime & Discount Points

A mortgage or mortgage loan is used by purchasers of real estate to raise funds to buy real estate. A mortgage is also done by property owners to raise funds while putting a lien on the property being mortgaged. A lien is a right to keep possession of property belonging to another person until debt owed by that person is discharged. Sub-prime mortgage with low credit score When purchasing a new home or refinancing the first thing the mortgage loan officer checks is your credit score. You need a credit score above 700 to get approved quickly for a loan(link credit karma). If your credit score is lower like 500, you can still get a loan with what is called a sub-prime loan. The sub-prime loan because of the risk with a higher credit score the interest rate will be higher. Therefore costing more money, but you can still buy a home. A tip you probably don�t know about Something you might want to try if the numbers make sense is what is called buying down a point. The point pertains to the interest rate of your loan. If you are looking for a way to reduce your monthly mortgage payments, buying points could lower the interest amount. Called discount points by mortgage brokers, this tactic is like an upfront payment for a lower interest rate, and one point is 1% of the-loan amount. The points are then paid to the broker at closing. This makes the most sense when you are early in your loan and have a lot of payments left. You should do the math to make sure you are saving money. You can buy points when refinancing or buying a new home.

Interest only Home loan-The borrower only pays the interest on the mortgage through monthly payments for a term that is fixed, usually five to seven years. After the term is over, many refinance their homes, make a lump sum payment, or they begin paying off the principal of the loan. There are two different reasons to use a mortgage loan. First when you are buying a new home and second when you want to refinance. There are many reasons to refinance your mortgage.(link quicken Affiliate) The number one reason that many people refinance is to get a lower interest rate. Some even choose to buy points to lower their rate. So they go from a fixed-rate to a lower fixed rate. The rule of thumb in the past was that it was worth the money to refinance if you could reduce your interest rate by at least 2%. Today, many lenders say that 1% savings is enough to refinance. People also convert from an adjustable-rate(ARM) to a fixed-rate mortgage or vice versa. Some want to shorten the term of their mortgage like a 30 year to a 15 year. While refinancing you can also consolidate debt. This includes credit cards at a higher interest rate than the mortgage rate. Beware of getting in debt again after freeing up credit cards. When used carefully, refinancing can be a valuable tool in getting debt under control. Refinancing costs usually between 3% and 5% of the loan amount. Some fees can be paid by the lender or reduced. Homeowners with at least 20% equity will have an easier time qualifying for a new loan. The break-even point is for example: Say the refinance costs you $2000 and your savings are $100 per month over the previous loan, it will take 20 months to recoup your costs. This may not be applicable if you intend to move or sell your home within two years so be sure by doing the numbers.