Arizona Bad Credit Home Loans - Are They Right for You?

Loans have been one of our lifesavers in times of financial trouble. It allows us to have the instant money we need for whatever purpose it may serve. However, the downside of loans is the interest rate that comes along with it. We cannot deny the fact that interest rates on loans could affect the borrowers’ ability to settle it. Yet, many still opt to get loans regardless of the interest rate for important aspects of acquiring a property or for home loans.

One of the loans that most people get with bad credit but still wish to get a home loan is the adjustable rate mortgage or ARM. This is the most common type of subprime mortgage for Arizona bad credit home loans that borrower or buyers can rely on. A subprime mortgage is given to the borrowers with a low credit rating. A person who has a low credit rating is not entitled to receive a conventional mortgage for the reason that they may have a hard time paying the loan back on time. Therefore, a subprime mortgage would be more suitable in case, even if the interest may be higher. To help you ease up in settling the home loan, adjustable rate mortgage is endorsed.

The interest rate under adjustable mortgage rate (ARM) varies in accordance with a certain scale. At first the interest rate is usually fixed for a certain period of time (in-between 1-7 years), and is reset periodically with the rate being adjusted to a higher level at the end of the term. Although ARM had a bad reputation in the previous years as it greatly contributed to foreclosure crisis, borrowers should keep in mind a few important factors. One factor was that these variable-rate mortgages were originally given to borrowers with bad credit that had overextended themselves by buying homes that were beyond their budget. And in addition, once the loan has been reset, they could no longer afford to pay their monthly dues.

However, Arizona bad credit home loans under ARM can still refinance either by a lower fixed rate mortgage or another adjustable rate mortgage. This can be done despite the many adjustments made to rates of an ARM. If you take advantage of the low-interest rate that ARM provides, you will be able to save thousands of dollars on mortgage interest, which will allow you to pay off your loan balance.  You can pay your home loans sooner than expected and significantly less interest will be paid.

A typical mortgage makes you pay the majority of the interest in the first half of the loan’s term. To further avoid the blunders of paying off a costly traditional mortgage, consider a few situations listed below. These tactics will help you realize that an adjustable mortgage rate is much more flexible than the traditional mortgage.

•    Adjustable mortgage rates help you rebuild your credit score. Let’s just say that you have a bad credit score but you’re working on to improve it. ARM is the best option to re-establish your credit score, especially if you’re qualified to get refinancing before the rate adjusts

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•    Adjustable mortgage rate allows you to save money if you plan to sell your property before the interest rate hikes.  If you plan to be living in your house in a short span of time and have plans to sell it, better do it while the rate is at its lowest. This will prevent you from paying higher interest rates after the reset.

•    Adjustable mortgage rate is the right plan for short-term investment. Most of the people today are in a buy and sell scheme. They bought an old property, have it renovated and then sold it to earn bucks. If the property bought is under ARM this could help you save money as you renovate it, since chances are you’re not going to pay the new interest rate once it has adjusted at the end of the term.

Though some risk can be encountered in Arizona bad credit mortgage with an adjustable mortgage rate enrolled, this can be minimized through smart investments. Keep in mind that overextending in ARM could lead to default or worse, foreclosure. ARM often allows borrowers or buyers to acquire a home that is beyond what they could afford with a traditional mortgage. This is because the lender bases the ability of the borrowers to pay off the monthly dues. However once the rate is reset, the dilemma is in paying off those dues once they arrive. To get the latest gist about bad credit home loans and applicable subprime mortgage, it’s best to talk to a trusted mortgage broker at Level 4 Funding.

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

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

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

Sub Prime Mortgage Arizona and Your Debt-to-Income Ratio

Before you purchase a home or any other large ticket item, you should look at your current finances. Do you already have a loan that you are paying off? If you do, you may already have significant debt, which can affect your ability to take on an additional loan.

Additional debt may be debt from credit cards, car loans and even student loans. All this additional debt can wrack up the amount of payments you make every month. What about your current income? Is your annual salary enough to cover your bills and save enough for a house? If all of these questions pertain to your situation, you may likely have bad credit as well. Bad credit does not mean you should pass by on buying a home.

Learn to secure a Sub Prime Mortgage Arizona. What constitutes a high debt-to-income ratio and how can I lower it?

Debt to income ratio is something to constantly be aware of when you want to buy a house. An income needs to be high enough that it will cover all monthly expenses. If your income is not high enough for the month, then it may be more difficult to secure a loan. How banks look at it, is that if you are already paying 2/3 of your income each month to bills and general living expenses. Any more than that, then you wouldn't have enough money for a roof over your head.

Therefore is best as a general rule, income must be 3 times the amount that you would pay for a monthly payment on a home. It may not be fair to an individual if they are able to live comfortably if there living costs are higher than 1/3 of their monthly salary, but that’s what lending institutions generally use to qualify others for loans.

It is also in your best interest to put together a budget before you decide to purchase a particular home. Take note of your average monthly salary and decide if the house you are purchasing is feasible. Depending on the amount of savings you have in your bank account, you may be able to buy your favorite home despite having debt.

Money you have available in savings may also lower your debt-to-income ratio. If you have significant savings that can be put towards a down payment, then you would not have to borrow a significantly high loan. It is easier to qualify for a smaller loan if your debt is not outrageous and your income is satisfactory. However not everyone has enough in savings to cover a down payment on the house they want. If that is the case, then it is advisable to look at other options when you have a high debt-to-income ratio.

Do you need a low debt-to-income ratio to secure a Sub Prime Mortgage in Arizona?

The simple answer is no.  If you cannot alleviate your debt or your debt-to-income ratio is less than stellar, there are still options available.

A sub prime mortgage is otherwise known as a bad credit loan. If you have bad credit due to having a high debt-to-income ratio, then you may consider a sub prime mortgage loan. You can apply for a specialized loan for bad credit situations. A specialized loan for bad credit is also commonly referred to as a sub prime mortgage. You do however need to make sure you qualify for a sub prime mortgage. A subprime mortgage in Arizona is easy to qualify for however, the only way to know for sure if you qualify for a specialized loan such as a sub prime mortgage is to speak with a professional lender.

The specialists at Level 4 Funding will help determine your credit situation and point you toward loan options that are best 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

Qualifying for a Stated Income Mortgage

A stated income mortgage can be a valuable mortgage type for individuals who are self-employed or make their living on seasonal employment. Without traditional income verification a stated income mortgage does not require the same documentation of income as a traditional home loan.

When you apply for a home loan, they will look at your financial life under a microscope. You will be asked to provide bank statements, tax records, support documents like W-2s, pay stubs, employer verification, and a host of other financial and personal documents. This is done in an effort by the bank to determine the risks of default of a particular borrower. Since the bank is lending such a large sum of money in a home mortgage transaction, it takes special care to lend to qualified buyers who can repay the loan.

For most people, providing documentation of their income is as easy as sending an electronic copy of their paystub. However, there are certain situations where providing a pay stub is nearly impossible. For these borrowers, it is beneficial to apply for a stated income mortgage. In this type of loan the buyer does not have to provide documentation of his income and is taken at his word as far as how much money he makes.

One situation where a stated income mortgage is beneficial is in the case of being self-employed. A person who owns his own business might not receive the same income each month as his income is based on when business is doing well. Instead of having to provide two paystubs that give only a partial picture of his income, a stated income mortgage allow him to include his income for the year, not just a single month.

A similar situation in which a borrower would benefit from a stated income mortgage is in the case of seasonal employment. Take for example a fisherman who makes the majority of his money in the winter. If he goes to buy a home in the summer, he will not have paystubs to show his earnings. So, even if he makes over $100,000 each fishing season he could be denied a home loan. A stated income mortgage would allow him to use his entire income to qualify for a loan.  In addition to seasonal employment, there are careers with other non-standard income schedules. A Realtor would be a good example of such a career. A Realtor may make $8,000.00 in commission one month, nothing the next, $16,000.00 the third and then nothing for 3 months. Although the agent is making enough money to purchase a home, the instability of her income might disqualify her from obtaining a traditional loan. By using a stated income mortgage she could account for all of her income, even if she isn’t earning any during the current month.

Individuals who earn money from investments can also benefit from a stated income mortgage. Many investors, particularly real estate investors, have a high debt to income ratio. However, because they often own multiple properties their disposable income can be quite high. A traditional mortgage would look at the numbers and the debt ratio and not consider how much income the properties were generating. A stated income mortgage would allow the investor to qualify, even with a high amount of debt due to properties owned.

Arguments against Stated Income Mortgages

One of the main criticisms of stated income mortgages is that they are an easy target for fraud. Since income is not verified using traditional documentation, it is easy for an applicant to overstate his income. For this reason stated income mortgages have been given the rather unflattering nickname of “liar’s loans.” An investigation into stated income loans by the IRS and various lending companies showed that there has in fact been a significant amount of loans where the income claimed for the loan was higher than what was reported to the IRS. Approximately 60% of stated income loans were over-inflated.

Although it is a bit shocking that 60% of stated income mortgage applicants overstated their income, there are a variety of reasons and factors that could have influenced this. The most obvious is that the borrowers lied about their income to qualify for a higher loan amount. This would be especially problematic because it could lead to an increase in loan default and foreclosure rates. Another reason that there could be discrepancy in the two declared incomes could be that what is reported to the IRS is less than what the individual actually made. For example, many servers do not declare tips (although they should be as not doing so is illegal) so their tax income and actual take home pay may be different.

Despite concerns about fraud, stated income mortgages can be a useful tool for borrowers with unstable income.

If you are in a situation where you are having difficulty qualifying for a traditional home loan because of the instability in your income source or difficulty providing proof of income, a stated income mortgage could be a good option for you. Contact a mortgage broker to learn more about all of your home loan options.

Level 4 Funding LLC

Dennis Dahlberg, Broker/RI/CEO

NMLS 1058389 AZMB 0923961

23335 N 18^th Drive Suite 120

Phoenix AZ 85027

623-582-4444

www.Level4Funding.com