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Thursday, September 6, 2007
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Thursday, September 6, 2007
Re-Financing with Bad Credit
Many years ago, it would have been extremely difficult for those with bad credit to obtain a mortgage loan in the first place. However, today there are so many loan options available and so many ways for lenders to protect themselves that those with bad credit can not only find a suitable mortgage but can also find appealing re-financing options as well.
Those with poor credit should carefully consider whether or not re-financing is ideal for them at the present time but the process is not much different for them as it is for those with good credit. Those with bad credit who want to learn more about re-financing should consult a mortgage advisor who specializes in mortgages for those with bad credit. Additionally the homeowner should carefully evaluate their credit score and whether or not it has improved. Finally the homeowner should evaluate their options carefully to ensure they are making the best possible decision.
Consult a Mortgage Advisor
Consulting with a mortgage advisor is recommended for those with poor credit. These homeowners may be knowledgeable about the process of re-financing but their situation warrants consulting with an industry expert. This is important because a mortgage advisor who specializes in obtaining mortgages and re-financing for those with bad credit will likely be very knowledgeable about the types of options available to the homeowners.
When consulting with the mortgage advisor, the homeowners should be completely honest about their financial situation and should provide the expert with all of the information he needs to assist them in finding an ideal re-financing agreement. Being completely candid will be very helpful in enabling the mortgage advisor to assist the homeowner in the best way possible.
Consider Whether or Not Your Credit has Improved
Homeowners with bad credit should carefully consider whether or not their credit has improved since the original mortgage was secured. Homeowners who have documented proof of past credit scores can compare these scores to current values. Each citizen is entitled to one free credit report per year from each of the major credit reporting agencies. Homeowners can obtain these reports for use in making comparisons to the previous credit scores. Imperfections on the credit report such as bankruptcies, delinquent or missed payments and other transgressions do not remain on the credit report.
These blemishes are often erased from the credit report after a certain period of time. The amount of time the transgression remains on the report is proportional to the severity of the offense. For example a bankruptcy will remain on the credit report for significantly longer than a late payment. In examining the credit report, homeowners should consider the overall credit score but should also note whether or not previous offenses are being erased from the credit report in a timely fashion.
Evaluate Re-Financing Options Carefully
Once a homeowner has tentatively made a decision to re-finance the mortgage, it is time to start considering the many options that are available to the homeowner during the process of re-financing. Most homeowners mistakenly believe one factor of the re-financing process they have no control over is the interest rate. While this rate is largely dependent on the homeowners credit score, even those with poor credit have the ability to lower their interest rate by purchasing point. A point is typically equally to 1% of the total loan amount and may translate to a ¼ of a percentage point on the interest rate. When deciding whether or not to purchase points, the homeowner should carefully consider the amount of time it would take the homeowner to recoup the cost of purchasing the points. This will help to determine whether or not it is worthwhile to purchase one or more points when re-financing.
Homeowners will also have options in terms of the type of loan they choose when re-financing. Common options include fixed rate mortgages, adjustable rate mortgages (ARMs) and hybrid mortgages. The interest rate remains constant with a fixed rate mortgage, adjusts with an ARM and is fixed for a period of time and adjustable for the remainder of the loan period with a hybrid loan.
John Ugoshowa. You are welcome to use this article on your
website or in your ezinesas long as you have a link back to http://www.quickreg
ister.net/partners/
For more information on Re-financing see theRe-financing section of Quickregister.net Free Search Engine Submission Service at:http://www.quickreg
ister.net/partners/
Prosper: Does The Prosper Lending System Work
If you are looking to borrow money there are numerous sources available. Unless you have bad credit! If you have money that you are looking to invest, there are also many sources but which to you choose? The Prosper lending association claims to help both types of people. It is the purpose of this article to look at what Prosper is, how it works for borrowers and lenders, and the group structure that is available. So let�s look at what Prosper is.
Prosper is an online auction website where people can buy loans and request to borrow money. Prosper claims that it is the first P2P lending company in the United States and is founded by former E-LOAN founder and CEO Chris Larsen. The site claims that it allows people to borrow or lend money at market driven interest rates. Prosper claims that it fully discloses the complete workings of their system and say they have 330,000 users and have funded $70 million in loans. Using Prosper requires only your social security number, your bank account, your income level and your driver�s license number. Prosper charges a number of fees, including a 1% closing fee to the borrower.
For the borrower, Prosper allows members to request loans of up to $25,000 with the average funded loan being $5,000. Loans can be obtained to either refinance higher interest debt such as credit cards or payday loans, to invest in real estate, to invest in other income producing or appreciating assets, or to invest in small businesses. The interest that a borrower will pay is determined by the individuals credit score and can be as high as 29% for high risk borrowers. The top rate depends on the state the borrower lives in. Prosper states that it is not designed for someone who wants to get a fast loan because it breaks the loan up into multiple pieces to distribute risk, and then funds from the lenders offering the most attractive interest rates. After a loan is funded, the borrowers can look at the funds on offer, and choose whether to take at that rate or wait for a better deal. Once a loan is funded, a borrower will typically receive their loan within 2 to 7 business days. Borrowers may be required to fax documentation and if required will have 7 days to submit this documentation. Borrowers who fail verification do not get a loan, and are permanently suspended from Prosper. While it is possible that a high risk borrower can get a loan, there is no guarantee because Prosper is not doing the lending but rather individual lenders.
Lenders specify the amount of money they want to lend, the maximum amount to bid on each listing, and the minimum interest rate they�re willing to receive. After selecting a minimum interest rate, the lender bids in increments of $50 to $25,000 on the loans they choose to fund. Unlike the borrower, lenders are not charged any servicing fee. Many lenders are attracted to prosper by the higher then average interest rates related with high risk borrowers. These rates can sometimes be as high as 29%, depending on the borrower�s state. Prosper says that the lenders can see the number of delinquent accounts a prospective borrower has, the number of delinquencies in the past seven years, total credit lines and any credit inquiries in the past six months, among other details. Lenders must wait until $25 accumulates in their account before they can withdraw funds. While many lenders are drawn to Prosper because of the high interest rates, the risk is also higher then for borrowers with better credit and lower rates.
Borrowers can also become part of a group, where the group's reputation is based on the group member�s repayment patterns. A group is essentially made up of complete strangers will give you a fair chance to explain your need and get it filled. Prosper strongly prefers, but does not require, that potential borrower to join groups. Groups serve various services for borrowers on Prosper and groups with successful repayment histories should attract more lenders offering lower rates. Groups are rated by the past payment performance of their borrowers, and it is in each group leader's interest to be selective about the members that they allow to borrow money as a member of their group. Groups have been allowed to buy a five star rating by making payments for borrowers with the underlying idea being that groups whose members repay their loans reliably will earn a good reputation among the lender community. Because of this, future borrowers from those groups will be perceived as less risky and therefore be able to borrow at lower interest rates. Prosper is structured so that group leaders may receive compensation for their efforts, based on the number, size, and quality of loans originated on behalf of borrowers in their groups.
In conclusion, it does appear that Prosper can work for some people. While borrowers with bad credit do have a better chance of securing a loan because the lender likes the higher interest rate, there is still no guarantee that they will be funded. There is no fee involved for the borrower if the loan is not funded so they have nothing to lose by applying. The lender is taking some risk, however, especially if funding a high risk loan but Prosper says that the borrower must pay with automatic loan payments through a bank account which does minimize the risk to the lender.
If you are looking to borrow money or have some to invest, you can get more information about the Prosper system by clicking here.
Re-Financing with an ARM
An adjustable rate mortgage (ARM) is one of the most popular options available for both home mortgages and re-financing. Many homeowners do not fully understand the concept of an ARM and as a result may be somewhat hesitant to pursue this type of a mortgage. This is a shame because there are some situations in which an ARM or a hybrid mortgage can be the best mortgage solution for a homeowner who is in the process of re-financing. This article will focus on explaining the concept of an ARM, explaining situations where it is the best solution, debunking the most popular misconception regarding ARMs and explaining how those with bad credit can benefit from an ARM. At the conclusion of this article the reader should have a better understanding of ARMs and should be inspired to investigate this re-financing option further.
What is an ARM?
An ARM is an acronym for an adjustable rate mortgage. This means the interest rate associated with the mortgage is not fixed. Instead it is tied to an index such as the prime index and may rise and drop as the associated index rises and drops. The fact that interest rate is variable scares away many homeowners from considering this option further. However, there are certain safety measures in place which protect the homeowner from rapid increases. This safety measure will be discussed in greater detail later in the article on the section on the biggest myth regarding an ARM. However, for now homeowners should simply be aware that they would not be subjected to incredibly high interest jumps during a short period of time.
The Biggest ARM Myth
The variability of the interest rate in an ARM makes many homeowners feel very apprehensive. These homeowners envision interest rates going through the room during their loan term and resulting in their monthly payments skyrocketing. However, fortunately for these homeowners, rapidly increasing interest rates may not have a significant effect on ARMs.
This is because most ARMs have a built in clause which prevents the interest rate from rising more than a certain amount during a specific time period. During this time the national interest rate may rise significantly more but there is a cap on the amount the homeowner’s interest rate will be raised.
When is an ARM Desirable?
One of the most desirable situations for an ARM is as a part of a hybrid mortgage. Hybrid mortgages typically have one component which is fixed and one component which is adjustable. These types of mortgages may have a fixed rate for a set number of years begin to vary after this initial period. Alternately a hybrid loan may be variable for a number of years and then become fixed after this initial period.
The loan which begins with a fixed rate is usually desirable because the introductory rate is typically lower than the rate offered on traditional fixed loans for homeowners with comparable credit ratings. Homeowners may particularly like this option if they are repaying a smaller second mortgage and may be able to repay the loan in full before the introductory period ends.
ARMs for Those with Bad Credit
ARMs can also be very helpful for assisting those with bad credit in purchasing a home for the first time. There are a variety of loan options available today which makes it possible for even homeowners with poor credit to obtain a home loan. However, those with bad credit are usually offered these loans with unfavorable terms such as higher interest rates. Additionally, lenders may only be able to offer those with poor credit an ARM. Lenders take a significantly greater risk when they lend money to a homeowner with bad credit. As a result the lenders usually compensate for this increased risk by shackling the homeowner with less favorable such as a mortgage with an adjustable rate as opposed to a fixed rate.
John Ugoshowa. You are welcome to use this article on your
website or in your ezinesas long as you have a link back to http://www.quickreg
ister.net/partners/
For more information on Re-financing see theRe-financing section of Quickregister.net Free Search Engine Submission Service at:http://www.quickreg
ister.net/partners/
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