Refinancing Your Home For People With Bad Credit-Don t Get Robbed
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
Refinancing Your Home with Bad Credit: Don't Get Taken Advantage Of
Overview
Refinancing can be challenging if you have poor credit, but it's important not to get trapped by unfavorable terms. Here's how to protect yourself.
Key Tips for Refinancing
1. Understand Interest Rates for Subprime Borrowers
Research current interest rates for those with poor credit. Typically, these rates are 1-2 percentage points above the prime rate. If you're offered rates 3-4 points higher, you might be overcharged.
2. Get Multiple Loan Offers
Collect at least 2-3 mortgage loan offers to compare interest rates and fees. This positions you to negotiate better terms and lower costs.
3. Be Wary of Excessive Pre-Payment Penalties
Avoid loans with pre-payment penalties extending beyond 6 months to 2 years, as these can limit your financial flexibility.
4. Avoid Adjustable Rate Mortgages (ARMs)
If you already have a fixed-rate mortgage with a reasonable rate, think twice before opting for an ARM. After the initial fixed period, ARMs can lead to skyrocketing rates, especially if refinancing is difficult.
5. Watch Out for Unnecessary Fees
Some fees may be unwarranted or inflated. Review the following common fees:
- Origination Fees: Should not exceed 2%
- Warehouse Fee: Avoid
- Fax Fee: Avoid
- Consulting Fee: Avoid
- Endorsement Fee: Avoid
Research any additional fees to ensure they're justified and not overpriced.
Considerations Before Refinancing
Evaluate the long-term costs and penalties. Calculate the total payments required until any pre-payment penalty period ends. Assess if refinancing, including all fees, truly benefits you?"or if a home equity loan might be a better option.
For a deep dive into potential "junk fees" to watch out for, visit [Mortgage Sanity](http://www.mortgagesanity.com). Always stay informed to protect your financial interests when considering refinancing your home.
You can find the original non-AI version of this article here: Refinancing Your Home For People With Bad Credit-Don t Get Robbed.
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