Bad Credit - No FICO Score Loans
Disadvantages of 1st mortgages
Higher Interest rate
Chances are likely that your new rate will be much higher than what it currently
is, with a very good chance it will be a double digit number. For Example, a
Current first mortgage of $300,000 @ 6.25% = a payment of $1562. A new mortgage
of $350,000 @ 10.25% is $2,989.58. That is an increase in payment per month of
$1,427 and if you were to keep that loan for 2 years, it would be over $34, 000
more. Would you want to pay an increase like that? That’s not the worst part;
let's go into the pre-pay penalty.
Pre-Pay Penalty
With a new first mortgage, it usually comes standard with a 2 or 3 year
pre-payment penalty. That means you have to keep that loan, regardless of
increase in mortgage payments for 24 to 36 months or else you have to pay very
high, very outrageous fees. If you currently have a pre-payment penalty on the
loan, you are looking at 6 months interest payments on 80% of the current
balance. That is the general formula. The pre-pay penalty is not part of the
closing costs on a new loan, so that fee as well as the amount to reinstate and
normal charges will need to be paid. The pre-pay penalty usually comes out of
the cash out to you, and you will just have to increase your loan amount and
your payment if you want more cash out. Here is an example:
$300,000 current loan x 80% = $240,000 x 6.5% Interest rate. Pre-Payment Penalty
= $7,800.00
If you were getting $20,000 in cash out, now you will be getting $12,200.
Cash out
If you only need a little cash out to resolve your situation, then you would
have to refinance the entire loan to do so. Some lenders might now approve you
for cash out based on your credit score. That means you could end up in a new
loan with a 36 month pre-pay at much higher interest rate with no cash to help
with the new payments.
To sum this up, if you refinance your first mortgage you could be looking at an
interest rate as high as 12%, long term pre-pay of up to 36 months, and the
possibility of no cash out. What about a short term loan? Would you like to
leave that low interest rate where it is? How about NO pre-payment penalty? Let
me explain what a HELOC is and what its benefits are.
What is a HELOC and what are the benefits?
A HELOC, which stands for Home Equity Line of Credit, is a small loan that is
based on the equity in your home and tailored to fit your needs. The
qualification requirements for this are within the title of the loan, Home
Equity. We must verify the amount of equity you have before we can close your
loan and send any cash amounts to you or your lender. Have you ever been denied
a loan because you didn’t qualify based on your credit score? We know this can
be frustrating, that’s why our HELOC has NO FICO REQUIREMENTS. It’s ok if you
have collections or past due amounts on your credit; that will not stop you from
obtaining a new HELOC. We might encourage you to pay off your debts to improve
your credit profile, but it is never a requirement. This loan is designed for
the borrower with less than perfect credit. Do you have trouble verifying
income? Whether it is because of job gaps, cash transactions or being
self-employed, there is no income verification with our HELOC.
In most circumstances, if you get a small HELOC with a higher interest rate, you
will actually save money compared to refinancing and taking a new 1st mortgage.
Let me compare the options for you and answer any questions that you might have
with your current situation. I wish to personally thank you for reading this
document, and please call me so we can start working on a new HELOC for you.