Sub-Prime Mortgage Loans - Five Ways To Lower Your Rates On A Sub-Prime Mortgage
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Sub-Prime Mortgage Loans: Five Strategies to Lower Your Rates
Overview
Sub-prime mortgages don't necessarily mean excessively high interest rates when buying a home. With a bit of research and smart choices, you can save thousands on your mortgage. Here are five effective tips to help you secure low rates with the right subprime lender.1. Compare Lenders
The most effective way to lower your interest rate on a sub-prime mortgage is by comparing different lenders before applying. While it seems straightforward, many homebuyers neglect this step, ultimately costing them a lot. Dedicate a day to explore your options thoroughly. Request quotes online, and don't forget to consider conventional lenders, as they often offer favorable rates and terms for those with less-than-perfect credit histories.2. Choose an Adjustable Rate Mortgage (ARM)
Adjustable rate mortgages (ARM) generally offer lower rates and are easier to qualify for than fixed-rate mortgages. Keep in mind, though, that ARM rates can increase over time. However, if you plan to move soon or simply want to purchase a home quickly, an ARM may be your best option. You can always convert your ARM when your credit score improves. As property values rise and your equity grows, you'll be able to negotiate better terms down the line.3. Increase Your Down Payment
Increasing your down payment can reduce your interest rate by up to a percentage point. While financing with little or no down payment can be tempting for those short on cash, the rates are considerably higher. Ideally, aim for a 25% down payment to secure the best rates. Just ensure you have enough cash reserves for moving expenses.4. Pay Points Upfront
Paying points upfront can also help lower your interest rate. However, make sure you'll recoup these upfront costs. If you plan to move or refinance within a few years, you might not see significant savings. Sometimes, putting more money into your down payment yields better returns than paying points. Use a mortgage calculator to evaluate your options.5. Boost Your Cash Reserves
Increasing your cash reserves can enhance your credit score, qualifying you for lower rates. Consider using tax refunds or cash bonuses to bolster your savings. Lenders regard savings accounts, money markets, and CDs as cash reserves?"not stocks or other volatile assets.By following these strategies, you'll be well on your way to securing a more affordable sub-prime mortgage loan.
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