Subprime Loans and Refinance Advice and Help

BILL'S ANSWER

That is a great question that is facing millions of American homeowners: to refi or not to refi... that is the question.

To give you a quick snippet of advice, I'd always suggest exploring applying and seeing if you can get a better loan -- but watch out and get the best deal for you.

Given where the market is today (tight lender underwriting, slightly cut interest rates, and new FHA guidelines) you should evaluate a few parameters and then decide if now if the right time to try to refinance to a fixed rate mortgage or roll the dice and see if you can stay afloat when your ARM re-sets. The specifics are: i) how long you expect to live in the home {if you will live there forever, a 30 year fixed is a good idea... if you will flip the home in 2 years then a 2 or 3 year ARM is right for you); ii) your current loan (do you have a high interest rate, when it flips will your rate and payment be above market and do you have a pre-pay penalty that precludes you from an earlier refi), iii) your debt-to-income {DTI}, and your iv) loan to value (do you have equity in your home?)

If you want an introduction to pre-screened mortgage lenders that can help you evaluate these complicated decisions, Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the loan page and find if there is a lender that meets your needs at: Mortgage Refinance Quote

Now, back to your considerations on if you should Refinance a Subprime Loan today:

When making loan decisions, one of the most important factors potential lenders review is the loan-to-value ratio, or LTV, of the proposed loan. This ratio compares the amount of the loan you are trying to obtain to the current value of your home. The interest rates charged on 100% loan-to-value refinance loans, such as ones that many NEW homeowners seek, are generally higher than the rates charged on loans with a with lower loan-to-value ratios (it's intuitive, since they are riskier loans for the lender).

However, if your credit score has increased significantly since you first purchased your home (or if your income has risen and your debt to income ratio has improved substantially), you may be able to obtain a lower interest rate regardless of your DTI.

One potential problem encountered by many borrowers trying to refinance their home loans are early refinance penalties charged by their current lenders. Many loan agreements, state that borrowers must pay a penalty to their current lender if they wish to refinance their loan before the expiration of a certain period defined by the loan agreement. These "penalty periods" vary from loan to loan, but are frequently between two to five years from the date of the original mortgage. Before you attempt to refinance your current mortgage, you should contact your current lender to discuss whether or not your current loan agreement includes a prepayment penalty, and if so, its amount and when you can refinance without penalty. These penalties can be quite costly, and can easily make a refinance loan too expensive to save you money over your previous loan. Again, you should find out the amount of the penalty, if any, on your current loan, then contact several potential refinance lenders to discuss whether or not a refinance loan is a practical solution for you.

Lastly, depending on your loan size and a few other variables, you may qualify for an FHA loan (you cannot be larger than $417k in loan size and cannot have missed payments BEFORE your ARM loan flipped). Ask you lender or broker about if this is right for you.

To learn more about refinance loans, I encourage you to visit the Bills.com Home Refinance Information page at http://www.bills.com/home-refinance/

If you enter your contact information in the Bills.com Savings Center at the top of the page, we can have several pre-screened lenders contact you to discuss the refinance options available to you. I wish you the best of luck in finding a loan the meets your needs, and hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

www.bills.com/