Subprime Mortgages and the Refinancing Boom
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Subprime Mortgages and the Refinancing Boom
A Guide to Subprime Mortgage Refinancing
As subprime borrowers often struggle to qualify for a second mortgage or home equity loan, refinancing their first mortgage remains a key option to access equity. Here’s a comprehensive look at subprime mortgage refinancing and some helpful tips.
Understanding Subprime Borrowers
In the U.S., numerous mortgage companies, including some of the most reputable, cater to subprime mortgage refinancing. Steven Frank, Senior Vice President of Marketing at FlexPoint Funding, defines a subprime borrower as one with a FICO score below 620. Such borrowers may face higher interest rates?"typically 1.5% to 2% above standard rates?"but the subprime market is still thriving with eager lenders.
Subprime Mortgage Market Trends
According to Steve, the biggest refinancing boom transpired between mid-2002 and September 2005, with a staggering 80% of Americans refinancing their homes. During this period, adjustable-rate loans fell below 4%, while fixed rates dropped to around 5%.
Now, both fixed and adjustable rates hover around 6.5%, with prospects of reaching 7% for A-grade 30-year fixed mortgages and 9% for subprime mortgages by the end of 2006. Home appreciation is stabilizing at a more typical 6% - 12% annually, and most homes remain on the market for about six months, signifying a balanced market.
Recommended Mortgages for Subprime Borrowers
Subprime borrowers will likely need to refinance their first mortgage to access equity, potentially borrowing up to 95% LTV (loan to value), though 75% - 85% is more common. The once-popular 125% LTV mortgages are now scarce, and subprime borrowers typically don't qualify.
Selecting the right lender is crucial. Choose a company specializing in flexible, affordable solutions that consider individual needs beyond past credit issues.
Mortgage Refinancing Tips
1. Check Your Credit: Up to 15% of subprime borrowers might qualify for traditional loans according to Freddie Mac. Aim for prime-rate refinancing if possible.
2. Watch Your Costs: While interest rates tend to be similar among subprime mortgages, the loan structure can greatly affect costs:
- Mortgage term length (10, 15, or 30 years)
- Fixed-rate vs. adjustable-rate loans
- Points to be paid (a point equals 1% of the loan)
- Processing fees and closing costs
3. Look for Good Customer Service: Opt for lenders that guide you through the application process, verify your information, and clearly explain loan terms. They should also advise on locking in an interest rate during processing.
4. Get a Free Quote: Use resources like [Bad Credit Mortgage Refinancing Now](http://www.badcreditmortgagerefinancingnow.com) to explore refinancing options.
By staying informed and choosing the right lender, subprime borrowers can effectively manage refinancing to improve their financial situation.
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