Do you have less than average credit? Have you had late or missed mortgage payments in the past year?
###Lenders check your FICO score
If you answered yes to both or even one you might think you won't be able to refinance your current mortgage. Well you can, you just need to search a little harder for the right lender. Sub-prime, or non-conventional, lenders specialize in below average FICO(r) scores. However these lenders take other factors into account when determining the rate they will offer you.
Mortgage payment history
In addition to your FICO(r) score the lender will grade your mortgage payment history over the past 12 months that is reported on your credit report. A 30 day late payment occurs when your payment is received more than 30 days past the due date. Each lender has its own grade level depending on the payment history in question. For instance no late payments would be an A grade but 1 late payment could be A- or B level.
Loan to Value ratio
Next the lender will calculate your loan-to-value (LTV) ratio. This is based on the new proposed loan amount divided by the value of your home. The lower the LTV means the less risk to the lender. In the unlikely event that your were to go into foreclosure the lender would have an easier chance of selling your property and recouping the loan amount.
Loan documentation
The final criteria is loan documentation. If you are able to provide and verify income via pay-stubs, W-2s or tax returns the rate is better. These lenders do allow stated or no documentation loans with corresponding higher rates.
To summarize, a subprime lender will offer you a rate derived from their matrix based on your FICO(r) score, mortgage payment history, LTV and income documentation. The difficult step will be finding the lowest rate among all the lenders available since they will all differ. We recommend contacting one of our trusted online lenders, they can review your situation and find 3 to 4 rate quotes.
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Do you have less than average credit? Have you had late or missed mortgage payments in the past year?
###Lenders check your FICO score
If you answered yes to both or even one you might think you won't be able to refinance your current mortgage. Well you can, you just need to search a little harder for the right lender. Sub-prime, or non-conventional, lenders specialize in below average FICO(r) scores. However these lenders take other factors into account when determining the rate they will offer you.
Mortgage payment history
In addition to your FICO(r) score the lender will grade your mortgage payment history over the past 12 months that is reported on your credit report. A 30 day late payment occurs when your payment is received more than 30 days past the due date. Each lender has its own grade level depending on the payment history in question. For instance no late payments would be an A grade but 1 late payment could be A- or B level.
Loan to Value ratio
Next the lender will calculate your loan-to-value (LTV) ratio. This is based on the new proposed loan amount divided by the value of your home. The lower the LTV means the less risk to the lender. In the unlikely event that your were to go into foreclosure the lender would have an easier chance of selling your property and recouping the loan amount.
Loan documentation
The final criteria is loan documentation. If you are able to provide and verify income via pay-stubs, W-2s or tax returns the rate is better. These lenders do allow stated or no documentation loans with corresponding higher rates.
To summarize, a subprime lender will offer you a rate derived from their matrix based on your FICO(r) score, mortgage payment history, LTV and income documentation. The difficult step will be finding the lowest rate among all the lenders available since they will all differ. We recommend contacting one of our trusted online lenders, they can review your situation and find 3 to 4 rate quotes.