Sub Prime Mortgages Arizona: Predatory Lending Practice or Sound Financial Strategy?

Subprime mortgages in Arizona have been considered a predatory lending practice by many law makers. The facts show otherwise as subprime mortgages Arizona have typically been used by investors as a money making strategy, not by people who have been taken advantage of by banks.

A subprime mortgage is a lending practice that can benefit borrowers with low credit scores. Typically, subprime mortgages are given to borrowers with a less than stellar credit history or to borrowers with other financial factors that make them too much a liability for a traditional loan. Usually subprime borrowers have a credit score of less than 640, which is considered a poor score. Based on these factors, the borrowers would not qualify for a traditional mortgage so banks give them a subprime loan with a higher than average interest rate. Because subprime borrowers represent a higher risk for the lender, most lenders charge a higher than prime interest rate.

The most common type of subprime mortgages that are offered are adjustable rate mortgages or ARMs. An adjustable rate mortgage initially offers a very low interest rate, usually below the prime rate offered by a traditional loan. For an informed investor who intends to fix and flip or only own a home for a short period of time, an adjustable rate mortgage can be a great investment tool. However, an ARM is somewhat misleading to uninformed borrowers as it initially charges a lower interest rate. After the ARM period the rate adjusts to a significantly higher rate and higher monthly payment. In addition, ARMs allowed borrowers to purchase homes that were too expensive for them to afford with a traditional mortgage, making it impossible for them to refinance to a fixed rate. These types of mortgages were given out frequently by banks to un-creditworthy buyers in 2005 and 2006. Once the loan reset to the higher interest rate, many borrowers were unable to afford their new monthly payments and defaulted on their home loans. ARM were largely responsible for the increase of subprime mortgage foreclosure increases in the mid-2000s.

In response to the foreclosure crisis, may law makers want to eliminate sub prime mortgages Arizona entirely. They cite these types of loans as being predatory lending practices as the interest rates can reach as high as 9% when a traditional loan hovers around 4%. They also claim that these loans are disproportionately given to people who make less than the median level of income and there is also fear that subprime mortgages could hurt minorities or young people.

Facts about Subprime Lending in Arizona

There is somewhat unfounded concern among law makers that sub prime mortgages Arizona are designed by banks to gain the most money from groups who have the least. The foreclosures of the mid-2000s helped fuel this fire. Politicians  make a variety of claims about the risks of sub prime lending in Arizona, however, many of these claims are simply not true.

The first assertion by politicians looking to discredit subprime lending in Arizona is that sub prime mortgages Arizona is that minority borrower will be discriminated against and only offered high interest loans. A demographic study indicates that this is untrue. By analyzing zip codes and demographics, it was concluded that subprime mortgages are not more common in zip codes with a Hispanic population concentration. 

A second claim against sub prime lending is that it unfairly discriminates against low income borrowers. This claim is categorically false. In fact, most subprime borrowers in Arizona are above the median income line. Most subprime mortgages tend to be second mortgages that are purchased as investment properties. Subprime borrowers also tend to own fewer low value homes than traditional mortgage holders.

Finally, another criticism is that subprime loans are unfairly given out to borrowers who are young without a substantial credit history. Subprime mortgages are not given out to mostly young borrowers. In fact, the average age of a borrower for a subprime mortgage was between 35 and 55 years of age. This indicates that subprime mortgages are not being used to penalize borrowers with insufficient credit history due to age.

Subprime mortgages are not being used by banks to unfairly discriminate against borrowers, ratherthan are a valuable tool for borrowers with low credit scores or as a means to purchase an investment property.

Since subprime mortgages often reset to higher interest rates, they have unfortunately been lumped into the same category as title or payday loans. Some politicians see them as predatory practices without having all the facts. Sub prime mortgages Arizona are a tool that can be used for borrowers that would otherwise not qualify for a mortgage. As long as the borrower is informed about the risks, a sub prime mortgage can be an invaluable tool to help them purchase a home or investment property. Contact a local mortgage broker to determine your options and see if a subprime loan is a good option for you.

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Tel:  (623) 582-4444 | Fax: (888) 279-6917

www.level4funding.com
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

Using an Adjustable Rate Mortgage to your Advantage

In recent years, sub prime mortgages Arizona have earned a bad reputation. However, they can be a good option for borrowers to save on interest and insurance costs.

A subprime mortgage is a loan given to a borrower who is considered to be a higher risk due to a poor credit score. Typically a subprime borrower has a credit score of less than 640, but this does vary. Since the lender is assuming a higher risk, the interest rate is also generally higher. Critics of subprime lending argue that it charges unfair interest rates and further burdens individuals with low incomes and high amounts of debt. However, for many individuals, sub prime mortgages Arizona are the only way they can qualify for a home loan.

The most common type of a sub prime mortgage is an adjustable rate mortgage or ARM. An ARM starts off at a low interest rate, usually lower than the prime rate around 2-3 percent. After a period of time from 1 to 5 years, the rate then adjusts to a much higher rate anywhere from 5 to 10 percent, depending on market conditions. This will cause your payment to go up rapidly. ARMs got a bad reputation during the housing crisis of the mid 2000s and were accused of being a way for banks to loan money to and take advantage of subprime borrowers. Many people lost their home due to the inability to make the new, higher payments after the rate adjusted.

Adjustable rate mortgages have been attacked by both talk news show hosts and some financial advisors who claim this type of loan is single handedly responsible for the foreclosure crisis and subsequent economic recession. This however, is too simplistic of a picture and throws the baby out with the bathwater, so to speak. While there are risks to sub prime mortgages Arizona, there are also benefits to ARMs that can be taken advantage of by both sub prime and high credit borrowers.

Benefits of an Adjustable Rate Mortgage

For many people, a traditional mortgage actually costs them money and simply does not make sense. Most people do not live in a home for 30 years, in fact the average time frame is 8 to 10 years. Even if they stay for longer, most people end up refinancing their mortgage at least once and some people refinance every 2 to 3 years. This ends up costing a significant amount in interest because in traditional home loans, you pay the majority of you interest during the first half of the loan term. Also, traditional 30 year loans charge a higher interest rate as a type of insurance for the lender. The lender assumes you will take 30 years to pay off the debt. 30 years is a long time and there is a chance that something could happen that would cause you to default. The lender charges you a higher interest rate to earn more money to keep as a type of insurance against default. The terms on an adjustable rate are only about 1 to 5 years so they can offer a lower interest rate since the term is shorter and less risky for the lender. An adjustable rate mortgage has a much lower interest rate than a traditional mortgage which can save you thousands of dollars over the loan term.

Although the rate of ARMs does adjust with time, you can always refinance to either a lower fixed rate mortgage or even another adjustable rate mortgage. Taking advantage of the lower interest rates of an ARM could save you thousands on mortgage interest, giving you more money to pay off the balance of your loan. As a result, you can pay off your home sooner and pay significantly less interest.

The most important piece of advice regarding ARMs, is to never overextend yourself. Many people bought homes that were otherwise out of their budget by taking advantage of the low interest payments offered by an ARM. Once the rate reset, they were unable to afford the home and could not refinance to a fixed rate mortgage because the home was out of their budget. Make sure that you budget for payments with an increased interest rate and buy a home that you can actually afford.

                               

Talk to a mortgage broker to determine if an adjustable rate mortgage makes sense for you.

Although there are many benefits to an ARM, there are also risks. Amortgage broker can help you navigate the ins and outs of ARMs and other sub prime mortgages Arizona. Make sureyou know all of your options to help save money and make smart mortgage decisions.

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Tel:  (623) 582-4444 | Fax: (888) 279-6917

www.level4funding.com
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

How to Qualify for a Home Loan with Less than Stellar Credit

There are a variety of circumstances that can lead to a low credit score. Learn how you can get a badcredit mortgage Arizona and qualify for a home loan, even if your credit is less than perfect.

Bad credit can make you feel like a failure. Many Americans who have bad credit report feeling alone, miserable, and almost hopeless. There is a false picture of a person with bad credit that paints him as irresponsible, reckless, and even as a thief. This could not be further from the truth. There are a variety of factors that can lead to a lower credit score. Job loss, divorce, a sudden change in income, or even an old credit card you forgot about can cause your credit score to suffer. Recent statistics released from FICO Inc. show that 25% of the 170 million Americans with active credit accounts have a FICO score of less than 600. This is considered a low credit score and if you have a low score, you can have trouble getting credit cards, car loans, and even store credit accounts.

If you are one of the 42.5 million Americans with a low credit score, you probably assume that homeownership is beyond your reach. However, with new bad credit mortgage Arizona programs as well as federal programs, borrowers can qualify with low FICO scores.

As with any mortgage it is important to analyze the risks and benefits of a low credit mortgage. Once you have decided to stop letting your FICO score hold you back, it is important to know your options. Most likely you will not qualify for a bad credit mortgage through a bank, so it is important to find a reputable mortgage broker. A broker has more flexibility in terms of types of loans that can be offered so you are more likely to qualify via a broker than a bank.

Types of Bad CreditMortgages

Once you have decided to look for a home loan, you need to do your research. There are a variety of home loan programs available to people with bad credit but they all have different features. Analyzing the risks and benefits will help you choose the right program for you.

One type of loan that is available for people with bad credit is a type of FHA loan. An FHA loan is backed by the government and will allow you to borrow about 96.5% of the value of the home you are purchasing. This means that you won’t have to come up with a large chunk for a down payment. In addition, the government backing means that you will be more likely to qualify, even with less than stellar credit. You will pay monthly insurance on your loan. In addition to you principle and interest payments, you will also pay a PMI insurance payment. This will increase the amount of your monthly mortgage payments until you pay off 20% of the loan amount. You can also couple FHA loans with different federal programs that offer down payment assistance or cash back at closing like Home in 5. These programs are constantly evolving and changing, so make sure to talk with a mortgage broker about what you may qualify for.

A second type of loan is an adjustable rate mortgage or ARM. An ARM is offered to subprime borrowers who would not qualify for a traditional loan. It offers a low interest rate at first but then resets to a high interest rate after a specified period, usually 1 to 5 years. Once the rate adjusts your mortgage payment will increase due to the higher interest rate. This can be a good option if you only plan on owning the property short term or if you know you will be able to qualify to refinance your loan at the end of your low rate period.

Another type of bad credit mortgage in Arizona that is available is a hard money loan. A hard money loan is secured through a mortgage broker but is backed by investors instead of a bank. This is especially beneficial for people looking to do a fix and flip or short term purchase. Depending on the merit of the property you are purchasing as well as potential for income, investors will often invest capital, even if your credit score is lower than what is ideal. It should be noted that hard money loans are short term loans only. They cannot be used to purchase a home you plan to live in for any significant amount of time.

Make sure to know your options for home loans with bad credit.

Once you have decided to stop letting your credit score define your homeownership goals, find a broker to work with. Finding a mortgage broker that specializes in bad credit mortgage Arizona will ensure that you are receiving all the options to make owning a home a reality. 

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Tel:  (623) 582-4444 | Fax: (888) 279-6917

www.level4funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

How Do Sub Prime Mortgages Work?

What do you do when you find the perfect house and want to qualify for a mortgage? You first check to see if your finances are in order, such as having a significant amount of money for a down payment. You also make sure your credit is in good standing. Any credit score above a 620 is necessary in order to qualify for a quality loan with low-interest. But what happens when you find out your credit score is under 600? The best advice for individuals with low credit score but wish to receive a home loan, is to consider sub prime mortgages. With a sub prime loan, poor credit is not an issue. Instead of considering your credit, sub prime mortgages will look at other means that will qualify you to carry a loan. For instance, if you have a lot of cash saved up or make a reasonable income, these factors are generally enough to qualify for a sub prime home loan.

In this post we will discuss the details of sub prime lending, including what are subprime mortgages and how these types of mortgages work. After that, we will show you ways to apply for a sub prime mortgage and how to obtain a sub prime mortgage.

What are sub prime mortgages?

When we break down the phrase “sub prime mortgage”, sub prime generallymeans adequate, satisfactory or otherwise less than prime. When it refers to a mortgage, it means that generally speaking the loan is not at an ideal interest rate. However these home loans that are sub prime mortgages are specifically tailored to unique financial situations. When you want to finance a house, a sub prime mortgages acts as instant qualifier until your credit score is improved.

How do sub prime mortgages work?

Financing a home with a sub prime loan generally works the same way as a conventional loan. The only difference is that you will be working with a private lender. That is, you will be responsible to make payments towards the sub prime loan that is held by the private lender. Qualifying for a loan held by private lending is rather a simple process as sub prime mortgages are specialized for people who have credit problems.

How do I obtain a sub prime mortgage?

Compared to a conventional lending process, the process of qualifying for a sub prime mortgage is generally much simpler. You can obtain a sub prime mortgage through any private lending individual or company. It is advised to do your research and take your time when looking for a private mortgage lender. Take a look at the company’s longevity of their business, number of credentials and any customer reviews they may have.

One well-known, qualified company in Arizona that has professionals with many years of real estate experience is Level4Funding. Dennis has over 40 years experience in the housing business and can aid individual who seek sub prime mortgage. Call him at 623-582-4444 to schedule an individual consultation today.

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Tel:  (623) 582-4444 | Fax: (888) 279-6917

www.level4funding.com
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

Bad Credit Home Loans are More Common Then You Think

Buying a house and obtaining a loan from a bank is just one of those events in life that everyone goes through. However everyone also goes through the realities of keeping up a good credit score. And the reality is that you need good credit in order to secure a common mortgage loan from the bank. For some it is hard to keep up a good credit score and unsavory situations can occur unexpectedly. Also poor, uneducated decisions can lead to bad credit. All of these situations hinders the ability to buy a home, buy a car, or buy anything else that often needs credit.

When it comes to buying a house or any other large purchase item, the ability to show that you are a responsible borrower is essential. Just because someone has bad credit does not mean they are irresponsible or lack the income to make monthly payments on a loan. Hopefully there is still a chance that people with bad credit can still get a mortgage with Bad Credit home loans. Bad Credit loans are therefore more common than you may think.

How do people end up with Bad Credit home loans?

Bad Credit home loans are specialized to deal with people who want a mortgage but have a poor credit history. There are many circumstances that can lead to bad credit. People with bad credit may have a missed a few payments in the past or simply have an untraditional job, like a self-employed contractor. These kinds of circumstances hinder a person’s ability to take out traditional loans, especially for expensive items like a house. Without the ability to get a mortgage, bad credit individuals are out of luck when it comes to purchasing the house they want. Without a mortgage, they would have to continue renting or consider a much simpler living arrangement. They would have to qualify for a smaller loan or even pay in cash until their credit is improved. Improving bad credit also could take many years and a lot of patience. Many borrowers cannot wait that long and consider alternative ways of borrowing. The most common method is to apply for a mortgage specifically made for people with bad credit.

What do people do to qualify for Bad Credit home loans?

Because Bad Credit home loans are so common, they are generally easier to qualify for than typical loans. Unlike traditional lending through a bank, a bad credit loan is obtained by a specialized mortgage lender. Specialized mortgage lenders are professionals that help people successfully purchase the home they want. There are no fees or contracts of any kind when you speak with a loan professional. And unlike banks, they are willing to do what they can to get you approved for a mortgage.

Look in your phone or other common news directory in order to find a bad credit loan professional. Be sure to check out their reviews and other reports of their business practices. However if you are looking for an experienced lender, speak to Dennis Dahlberg at Level 4 Funding, LLC. With over 40 years of experience in real estate buying and selling, he knows what it takes to get approved for a mortgage despite bad credit. Call him today at 623-582-4444.

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Tel:  (623) 582-4444 | Fax: (888) 279-6917

www.level4funding.com
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

Bad Credit Mortgage Arizona: Why Credit Matters

Credit does matter when it comes to lending. Similar to job history,credit proves to lending companies that you have experience in the art of borrowing. Credit history can demonstrate trust, responsibility and commitment in terms of the ability to pay back what you owe. There are many situations where you may need a loan. Especially when it comes to buying a house.

How to determine bad credit and why does it matter when it comes to purchasing a home?

According to FICO International and other popular credit bureaus, a bad credit score is any score below 640. Credit scores above 640 are considered fair, good or excellent. Once your score is above 640, the chance of being approved for a loan increases significantly.

How does your credit become poor? What activities occur that results in bad credit?

Late payments. If you are late on credit card payments, that likely will have a negative effect to your credit score. To aid, this you may want to have your bills automatically deducted from a checking or savings account. This way you will not miss a payment and there will be no negative ding to your credit score. You can be confident that you will not miss a payment.

High debt. High debt can originate from any number of things. Debt is considered high when is over 1/3 of your monthly income. When you are living paycheck to paycheck, it is hard to keep track of your credit. Your income must be high enough that you are not worried about debt payments. Furthermore you have enough income that you can comfortably afford living expenses despite the inclusion of debt.

Defaulted on previous loans. If you have defaulted on loans in the past, whether they were loans for a car, healthcare or other situation.

Business failures. It is common knowledge that most businesses fail within the first couple of years. If you have ever owned a small business, than you may likely have experience in ventures that have failed. Owning a business can be stressful and before you realize it, you have spent most of your savings keeping it going.

Having a low credit score can hinder your ability to qualify for a traditional loan. This includes any vehicle, business or property loan. As we discussed from the beginning, credit history is similar to work history. It is a proven way that lenders, like employers, can take a background look at your ability to control debt responsibly. Your credit report (i.e. work resume) describes how you manage debt accounts and whether you have made payments on time. Of course, just like a resume, a credit report does not take in effect the details of your ability to borrow. It also does not account for simple mishaps and unfortunate tragedies that may have affected your credit. 

The situations explained above are such examples of unfortunate events. Many of these situations are at times not your fault and can come to as a surprise to you. Fortunately, good credit is not the end all, be all in securing a home loan.

 Common Misconceptions of Subprime mortgage Arizona

Subprime mortgages can be very useful for people that are looking to buy a house. Without this type of mortgage finding a loan may be difficult if you are struggling with any kind of financial difficulties. Many of these financial situations are out of people’s control and unfortunately this leads to a failure to qualify for large loans, especially mortgages. Knowing this fact, it is nice to know that there are other options available like subprime lending.

Despite the obvious upsides of Subprime mortgage Arizona there are negative connotations with these types of loan. In this article we will discuss and debunk the most common misconceptions about subprime lending. Consequently we will also examine the reasons why sub prime loans are actually helpful to buyers.

Why are Subprime mortgage Arizona cast in a bad light?

1.       Subprime loans are only lent to those that can’t afford them

This is simply not true. There are many different types of lenders along with various kinds of financial backgrounds. A lot of these situations weren't simply due to the lack of a person’s income. Unfortunate situations can occur which are not under the person’s control. Situations like employment status, defaulting on a high loan or previous mortgage; even such events like natural disasters. These situations often have nothing to do with whether buyers can afford to pay off a loan. Homebuyers may likely have the funds to carry a mortgage but simply had a past that disqualified them for a bank-sponsored home loan.

2.       All sub prime mortgage borrowers have bad credit

As mentioned above, there are many different types of loan borrowers. These borrowers can have many different financial backgrounds and be in different situations. Not all sub prime lending is the cause of bad credit and vice versa. Bad credit can also be the result of past hapless circumstances. Besides bad credit, home buyers likely will have a limited credit history. A limited credit history does not mean the individual has bad credit, but rather they do not have enough proof  (or “experience) in the act of repaying a loan. This gives banks a false impression that limited credit individuals are not financially capable to hold down a mortgage. People with limited credit history could be just out of college or school. They could also be people who do not carry a lot of credit cards or simply new to credit.

3.       Sub prime lending is the result of housing foreclosures and negative property values

Subprime mortgages are not the direct cause of foreclosures or loss of property nor are they the cause for negative property values. There are many other reasons for foreclosures to happen and it is not the result of using sub prime loans to secure a home.

How are Subprime mortgage Arizona are helpful to borrowers?

1.       Gives buyers a fair chance to own a home despite unfortunate circumstances

Despite past unsavory situations like loss of unemployment, sickness, or defaulting on a large loan, it will limit a buyer’s chance of obtaining a traditional home loan. Fortunately subprime mortgages exist to help out people that are able to make payments on a mortgage but may not qualify for a typical loan.

2.       Limited credit history

As mentioned earlier, limited credit history means that you don’t have enough proof or “experience” with borrowing credit. You may be on your first credit card that is still rather new or you may never have touched credit before. Either way, to a typical financial institution, you are a high-risk borrower. The only way to alleviate this situation is to wait until your credit history matures…or you can simply consider applying for a sub prime mortgage Arizona.

3.       Self-employed or other alternative income situations

Banks prefer borrowers with a guaranteed paycheck from an employer. This is reasonable to assume but it guarantees the lender that the borrower will have money coming in every few weeks. Unfortunately if you do not have a 9-5 job with an expected paycheck, it is more difficult to get approved for a loan. Individuals that are self-employed, rely on investments or other income situations need to seek alternative sources of borrowing. 

4.       No hassle with the banks

Why get frustrated with standard banking institutions, when there are other types of lending available? Instead of bank loans, other borrowers like yourself, have chosen to deal with private lenders. Private lending offices are often more flexible and sensitive to alternative financial situations when it comes to borrowing.

At Level4Funding we can help you get approved for a Subprime mortgage Arizona. Speak with one of our friendly advisors today!

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Tel:  (623) 582-4444 | Fax: (888) 279-6917

www.level4funding.com
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

Sub Prime Mortgages Arizona: Using an Adjustable Rate Mortgage to your Advantage

In recent years, subprime mortgages Arizona have earned a bad reputation. However, they can be a good option for borrowers to save on interest and insurance costs.

A sub prime mortgage is a loan given to a borrower who is considered to be a higher risk due to a poor credit score. Typically a subprime borrower has a credit score of less than 640, but this does vary. Since the lender is assuming a higher risk, the interest rate is also generally higher. Critics of subprime lending argue that it charges unfair interest rates and further burdens individuals with low incomes and high amounts of debt. However, for many individuals, sub prime mortgages Arizona are the only way they can qualify for a home loan.

The most common type of a sub prime mortgage is an adjustable rate mortgage or ARM. An ARM starts off at a low interest rate, usually lower than the prime rate around 2-3 percent. After a period of time from 1 to 5 years, the rate then adjusts to a much higher rate anywhere from 5 to 10 percent, depending on market conditions. This will cause your payment to go up rapidly. ARMs got a bad reputation during the housing crisis of the mid 2000s and were accused of being a way for banks to loan money to and take advantage of subprime borrowers. Many people lost their home due to the inability to make the new, higher payments after the rate adjusted.

Adjustable rate mortgages have been attacked by both talk news show hosts and some financial advisors who claim this type of loan is single handedly responsible for the foreclosure crisis and subsequent economic recession. This however, is too simplistic of a picture and throws the baby out with the bathwater, so to speak. While there are risks to sub prime mortgages Arizona, there are also benefits to ARMs that can be taken advantage of by both sub prime and high credit borrowers.

Benefits of an Adjustable Rate Mortgage

For many people, a traditional mortgage actually costs them money and simply does not make sense. Most people do not live in a home for 30 years, in fact the average time frame is 8 to 10 years. Even if they stay for longer, most people end up refinancing their mortgage at least once and some people refinance every 2 to 3 years. This ends up costing a significant amount in interest because in traditional home loans, you pay the majority of you interest during the first half of the loan term. Also, traditional 30 year loans charge a higher interest rate as a type of insurance for the lender. The lender assumes you will take 30 years to pay off the debt. 30 years is a long time and there is a chance that something could happen that would cause you to default. The lender charges you a higher interest rate to earn more money to keep as a type of insurance against default. The terms on an adjustable rate are only about 1 to 5 years so they can offer a lower interest rate since the term is shorter and less risky for the lender. An adjustable rate mortgage has a much lower interest rate than a traditional mortgage which can save you thousands of dollars over the loan term.

Although the rate of ARMs does adjust with time, you can always refinance to either a lower fixed rate mortgage or even another adjustable rate mortgage. Taking advantage of the lower interest rates of an ARM could save you thousands on mortgage interest, giving you more money to pay off the balance of your loan. As a result, you can pay off your home sooner and pay significantly less interest.

The most important piece of advice regarding ARMs, is to never overextend yourself. Many people bought homes that were otherwise out of their budget by taking advantage of the low interest payments offered by an ARM. Once the rate reset, they were unable to afford the home and could not refinance to a fixed rate mortgage because the home was out of their budget. Make sure that you budget for payments with an increased interest rate and buy a home that you can actually afford.

                               

Talk to a mortgage broker to determine if an adjustable rate mortgage makes sense for you.

Although there are many benefits to an ARM, there are also risks. A mortgage broker can help you navigate the ins and outs of ARMs and other sub prime mortgages Arizona. Make sure you know all of your options to help save money and make smart mortgage decisions.

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Tel:  (623) 582-4444 | Fax: (888) 279-6917

www.level4funding.com
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

Bad Credit Home Loans- Arizona Best Kept Secrets

            We don’t all have the perfect credit score to qualify for a loan to purchase a home. However, with bad credit loans Arizona residents can’t own the home of their dreams.

What’s part of your ten year plan? No doubt, being able to finally call a home yours in every sense is one of your top goals.  In fact, you've probably already set out in your mind how you’re going to design the master bedroom, or maybe you can envision a big screen television in your man cave. What’s holding you back? Bad credit doesn't have to deter you from making these things possible.

So what are your options? When mortgage lenders review the credit history of a borrower, they tend to look at three things on a credit line; the payment history, how much is owed and the age of the credit line. Late payments, frequently opening and closing accounts in addition to running up credit limits can have a negative impact on a the credit score. When attempting to get an home loan with bad credit you should start by looking for ways clean up your credit report. 

Tips For Cleaning Up Credit Report

Before applying for a mortgage with poor credit it’s important to do all you can to make improvement on your credit. This can be do by:

-          Removing old paid off debts from your credit report. This can be done by disputing claims with the debt buyer or Credit Bureau.

-          It’s common to find errors on your credit reports why is why you should thoroughly search all three of your credit reports for errors before applying for a bad credit  home loan, Arizona has many financial experts that can assist in this process.

-          Trying to pay off as many debts as possible. Make payment arrangements. Also, avoid accruing more debt by applying for credit cards and failing to pay current balances.

Bad Credit Home Loan Options

After cleaning up your credit report as best as you can, you should let prospective lenders know upfront that what kind of state your credit is in. This saves time by preventing the lender from searching into loans that aren't best for your current situation and they’ll be able to let you know quickly whether you will be able to secure a loan with their institution or not.

Depending upon how low your credit score is, you may be able to secure a home loan through a bank. However, you can expect to pay higher interest rates and you may even be required to put down a substantial down payment on the house you’re interested in purchasing. In addition  bad credit home loans Arizona has in place for residents include; sub prime mortgages.

A sub prime mortgage is a special type of mortgage option that is usually offered to people with low credit scores.  Since a borrower with a poor credit history is viewed as more of an higher risk than  the average, banks and other financial institutions charge higher interest at a rate that is drastically different from a conventional mortgage. 

Usually, borrowers with a credit score below 600 can qualify for a subprime mortgage.  Also, borrowers who've filed for bankruptcy within the last few years or have an history of late bill payments are eligible for this type of mortgage. How much of an interest increase can you expect to pay on a sub-prime mortgage?

There is no set general interest rate that lenders charge. However, a subprime mortgage payment is determined by important factor such as:

-          The size of the down payment on the home

-          The individual’s credit score

-          How many delinquencies are stated on the individual’s credit report

-          The type of delinquencies stated on the credit report

Bad Credit Home Loans From A Credit Union

When applying for a bad credit home loan, Arizona residents  have the option of borrowing from a local credit union. Credit unions are nonprofit, community ran financial organizations that provide credit and other financial services to members. If you have a poor credit history,securing a loan through a credit union could be the right move for you. Credit unions are known for their low interest rates and their great customer service. Most credit unions  by law can only charge up to 3 % interest rates or no more than 42% annually.

Credit unions have to protect the interests of all members, so before a loan is approved, the agent will have to make sure that you’re able to make payments on the loan by assessing your current financial state. This means that they’ll want to see how much income you are bringing in on a monthly or yearly basis and they may even want to see how much you have been able to save.

Yes, purchasing a home with bad credit is possible.  Finding the right loaning option will require in-depth research.

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Tel:  (623) 582-4444 | Fax: (888) 279-6917

www.level4funding.com
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix 

Arizona Real Estate: Obtaining a Subprime Mortgage Arizona

A subprime mortgage Arizona allows individuals with less than stellar credit to purchase real estate in the Grand Canyon State. Knowing the types of mortgages available will help you choose the right mortgage product and save you money.

With great weather, a stable economy, and a real estate market with great deals, it is no wonder that so many people want to move to Arizona. With some parts of the state getting over 300 days of sunshine each year and skiing in the northern part of the state, it is the perfect place for sun worshippers and snow bunnies alike. If you find yourself dreaming of moving to Arizona, but have bad credit, you will want to start researching subprime mortgage Arizona to learn about the different types of mortgages available in the state for borrowers who do not have perfect credit. If you cannot qualify for a traditional mortgage due to a low credit score, a subprime mortgage might be a good option.

A subprime mortgage is a loan given to a borrower who is considered to be a higher risk due to a poor credit score. Typically a subprime borrower has a credit score of less than 640, but this does vary. Since the lender is assuming a higher risk, the interest rate is also generally higher. Critics of subprime lending argue that it charges unfair interest rates and further burdens individuals with low incomes and high amounts of debt. However, for many individuals, a subprime mortgage, Arizona is the only way they can qualify for a home loan.

Although subprime mortgages generally charger higher interest rates, for almost 42.5 million Americans, it is the only home loan they can qualify for due to a low credit score. If you find yourself having trouble obtaining a home loan in Arizona based on your credit, do your research on sub prime mortgage Arizona to determine the type of loan programs you may be able to qualify for. Knowing the different types of subprime mortgages can help you select the right product for you and your family.

Types of Subprime Mortgages

One type of mortgage available to subprime borrowers is what is known as an adjustable rate mortgage or ARM. An ARM starts off at a low interest rate, usually lower than the prime rate around 2-3 percent. After a period of time from 1 to 5 years, the rate then adjusts to a much higher rate anywhere from 10 to 20 percent, depending on market conditions. This will cause your payment to go up rapidly. ARMs got a bad reputation during the housing crisis of the mid 2000s and were accused of being a way for banks to loan money to and take advantage of sub prime borrowers. Many people lost their home due to the inability to make the new, higher payments after the rate adjusted. An ARM can be a good option if you are in the process of rebuilding your credit and will be able to refinance to a traditional loan before your rate adjusts. It is also a good option if you are buying a short term home to either fix and flip, or you plan on moving within the low rate period.

Another program that is available to low credit borrowers is an FHA loan. This type of loan is backed by the federal government and offers low interest rates and low down payment options. The loan is insured by the government so the borrower will end up paying what is called primary mortgage insurance or PMI payments. PMI payments can range from anywhere between 80 and a few hundred dollars so it does increase your monthly mortgage payment. You will make these payments until you have paid off 20% of your home loan.

A third, less common type of subprime loan is a hard money loan. A hard money loan is offered by a group of investors, rather than a bank. It is a short term loan that is designed primarily for fix and flip houses. Since investors are offering the loan, not a bank, they are more likely to give loans to borrowers with low credit, providing they have a sound real estate investment. Hard money loans are usually short term loans and last for a couple years.

Deciding on the right loan product is essential to making your sub prime mortgage borrowing experience positive.

Talk with a mortgage broker to further discuss your loan options. You may also qualify for certain federal programs that offer down payment assistance or cash back at closing. Your credit score does not have to determine your home loan status. Stop letting a number define you and call a broker in Arizona today.

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Tel:  (623) 582-4444 | Fax: (888) 279-6917

www.level4funding.com
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027