Bad Credit Home Refinance Options

If you've been considering getting a home mortgage refinance and your credit situation is dire there are options. Even with the recent turmoil in the lending market, there are still options for home mortgages for those with credit issues.

The sub prime market deals with borrowers who have a credit score between 500 and 620. There has been quite a bit of news about the credit debacle lately. In fact, many sub prime lenders are no longer in business, or have scaled back their businesses considerably.

Not to worry, there are still plenty of lenders offering loans to borrowers with less than stellar credit. Other factors such as down payment size, or length of time at job can be used to help you qualify.

Disadvantages Of Sub Prime Mortgages

There are some very distinct disadvantages to sub prime loans. The whole sub prime debacle that we are currently going through didn't happen overnight.

A main problem with sub prime loans is that many of them are adjustable, with higher rates of interest. So, you could get in with a decent interest rate, just half a percent or so above normal prime rates, but find yourself in six months with a rate 3-4% above what you would pay with good credit.

Many homeowners find themselves after a few adjustments of their mortgage, paying almost double what the introductory rate was. Making it almost impossible to keep current with their payments.

Another issue with Sub Prime Mortgages is that often they carry with them prepayment penalties. What that means is you're stuck with the mortgage for a few years until the penalty expires, or you have to pay a huge fee to refinance, sometimes up to 3-4% of the entire value of the mortgage.

Because of these disadvantages of sub prime loans, you'd be well served to consider getting a FHA mortgage instead. FHA mortgages are government backed mortgages, that offer different choices to home owners. The benefits of an FHA mortgage is that they don't have prepayment penalties, and the rates are generally decent. There's often a little more paperwork involved but it can be worth it.

Many borrowers could benefit from working on their credit, with a little bit of work and a little bit of time you could pull your credit up to qualify for a prime mortgage.

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