Real Estate in Arizona - How to buy a house with bad credit

A typical question that most buyers with less than stellar credit ask is: How do I buy a house with bad credit? Now you may be wondering what a sub prime mortgage is and how it may benefit you. 

Quite simply a sub prime mortgage is a loan provided to an individual that is regarded as a high-risk borrower, due to their credit rating. Subprime borrowers who have a credit score of less than 640 are not the norm, however this may vary depending on the lender. Since it is the lender who is assuming this risk, the interest rate for a home loan may also be higher. Some sub prime naysayers complain that the interest on these loans is unfair. However keep in mind that in Arizona how to buy a house with bad credit, there are several types of subprime financing available. In fact, using this kind of financing correctly could turn out to be beneficial.

The most popular type of Arizona subprime mortgage offered in the state is known as an adjustable rate mortgage or ARM. An ARM begins by having a low-cost interest rate that is locked-in for a specified period of time, usually between 1 and 7 years. At the end of the term, the rate adjusts to a higher rate. Adjustable rate mortgages have earned a bad reputation in the mid-2000s for the role in the foreclosure bubble. That being said, it is crucial for you to understand that most of those ARMs were supplied to buyers with a bad credit report who simply overextended themselves. They simply bought more home than they could afford. When the rate reset, they could no longer make their monthly obligations.

Although the rate of ARMs does adjust with time, consider refinancing to a lower fixed rate mortgage or another adjustable rate mortgage. Taking advantages of the reduced interest charges of an ARM could save you thousands on mortgage interest. The money you save in interest can be used to pay off the balance of your loan and consequently allow you to pay significantly less interest.

Utilizing an ARM Arizona how to buy a house with bad credit

For many people, a traditional mortgage actually costs them more money than the actual value of the purchase. It just doesn’t make sense. Let’s be honest, most people do not live in a home for 30 years. In fact the average time frame to live in a house 8 to 10 years. Even if the homeowners decide to stay longer, the majority of people end up refinancing their mortgage at least once. Some homeowners refinance as often as every 2-3 years.

In the long run, traditional mortgages end up costing the buyer significantly more money upfront. This is because these ARMs require the buyer to pay the majority of the loan during the first half of the term. The traditional 30-year loan on the other hand, charges a higher mortgage rate as a kind of insurance for the lender. Your loan provider assumes you will take 30 years to settle the debt. Thirty years is a long time and there is a chance that something could happen that would cause you to default. The loan provider charges you a higher interest rate to make more money in case of default. The adjustable rates are only about 1 to 7 years so they can offer a lower interest rate since the term is shorter and less risky for the lender. These ARMs have lower interest rates than your traditional mortgage, and can save you significant amounts of money. In retrospect, a traditional mortgage can cost you thousands of dollars in premiums over the entire life of the loan. Subprime mortgages should be considered by both prime and sub prime borrowers alike, simply for it’s unique benefits. Below are a few situations when an adjustable rate mortgage might actually make more sense than a traditional mortgage.

1. When you have poor credit you want to restore. ARMs are fantastic tools to help rebuild your credit. Refinancing before the rates adjust during the course of the loan proves to be a good strategy to boost credit and get you in a home faster.
2. In case you plan to sell off your home before the rates reset and rise. This works whenever you plan on living in the home for a short while. Selling before the rates rise can help you avoid having to pay costly premiums.
3. If you are planning to improve the home to later sell it for a profit. In situations where you are not planning for a long-term investment, an ARM can save you money while you are remodeling a home.
4. When you are expect to earn more money in the near future. In this case, if the loan resets, the higher interest rates won’t matter because they will be easier to pay off.
5. If you are expecting to receive an inheritance or lump sum of money. After receiving a windfall, it’s usually easier to pay off any remaining balances of a mortgage. In this situation the ARM serves as an instrument that will keep your monthly payments low as you pay off the mortgage.

While there may be certain risks for adjustable rate mortgages, these pitfalls are often minimized by intelligent investing and research.

A key strategy to remember whenever dealing with these types of loans is to never overextend and to be honest with your budget. An ARM often allows buyers to buy a home that’s greater than one they could afford. Bear in mind that once these rates reset they can always be raised and can price you out of your home, which may lead to foreclosure.  

Speak with a loan specialist at Level 4 Funding to receive the most up-to-date Arizona sub prime mortgage programs. Find out Arizona how to buy a house with bad credit and what makes the most financial sense for you and your household.

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Tel:  (623) 582-4444 | Fax: (888) 279-6917
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

How to Get an Arizona Mortgage with Bad Credit

Sometimes people get into some financial blurs because of some investment or monetary blunders. Because of this, it would sometimes be difficult to get any type of loan or mortgage, especially if you have bad credit. After being turned down by the first financing firm or bank for a housing mortgage in Arizona, you should not give up that easy. But this time you have to strategize for your housing loan to be approved even if you, as a borrower, have bad credit.

Some banks still approve housing loans even when mortgage applicants are considered to be high risk due to a poor credit score. Lenders will give borrowers with bad credit a subprime mortgage. The only minor setback regarding a subprime mortgage is that they may offer a slightly higher interest rates. The subprime mortgages offered in Arizona are more flexible however. These types of subprime mortgages in Arizona are known as Adjustable Rate Mortgages (ARM). These loans can be available to homebuyers starting with a lower interest rate. Additionally there is also a lock-in period ranging from 1 to 7 years. Hence, the interest rate increases after the given term.

Here are some ways on how to get your Arizona mortgage withbad credit approved:

1. Manage your funds and boost your credit rating before applying for an Arizona mortgage with bad credit. Making necessary corrections on your credit reports can do this. Doing this will help improve and rebuild your credit score.
2. It would save you a substantially great amount of money if you consider an Adjustable Rate Mortgage rate. This type of loan will truly be helpful if you plan to sell the property before the interest rate increases, allowing you to save money by not having to pay the fees anymore.
3. Getting a Federal Housing Administration (FHA) approval can also help. The FHA will not lend you the money for the mortgage, but it can provide the lenders a form of insurance to settle all monetary issues in the case of mortgage default. Getting an FHA approval would boost your odds for a mortgage approval.
4. Opting for hiring the services of a mortgage broker is one of the best options for people with bad credit records. Although it is imperative to make certain that the one you are hiring is legitimate and licensed. These brokers could really help you find a lender that could approve your housing loan because they have access to numerous lending resources. Payment of the mortgage will be more convenient because of their awareness about the different low credit programs offered by some lenders.
5. Be able to seek a consistent, well-compensated job to prove to lenders that you have enough funds available to pay the mortgage.
6. If your debts are far higher than your income, this will cause disapproval of your mortgage application. The best thing to do is to pay off all other loans and credit card balances to qualify for an Arizona mortgage with bad credit.
7. Try to look for a reputable co-signer who has a good credit score. This will guarantee the lender that if in case you fail to pay or default your mortgage, the co-signer will be responsible for paying any obligatory fee.

 If you have problems with bad credit, speak to the loans professionals at Level 4 Funding to learn more about getting approved for a mortgage.

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Tel:  (623) 582-4444 | Fax: (888) 279-6917
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

Sub Prime Mortgage Arizona for Regular Borrowers

A sub prime mortgage Arizona is typically designed for borrowers who have bad credit to purchase Arizona real estate.However, there are certain situations where prime borrowers can benefit from asub prime loan. Knowing the types of loans available can help you make aninformed mortgage decision.

A subprime mortgage is a loan given to a borrower who is considered to be a higher risk due to a poor credit score. Typically a subprime borrower has a credit score of less than 640, but this does vary. Since the lender is assuming a higher risk, the interest rate is also generally higher. Critics of subprime lending argue that it charges unfair interest rates and further burdens individuals with low incomes and high amounts of debt. However, if used correctly a sub prime mortgage, Arizona can benefit all Arizona home buyers, even those with good credit. There are several types of subprime mortgages available and each type has different advantages and risks. 

  

The most common type of Arizona subprime mortgage offered in the state is an adjustable rate mortgage or ARM. An ARM starts out with a low interest rate that is locked in for a specified period of time, usually between 1 and 7 years. At the end of the term, the rate adjusts to a higher rate. ARMs earned a bad reputation in the mid-2000s for contributing to the foreclosure crisis. However, it is important to note that many of these ARMs were given to buyers with bad credit who overextended themselves by buying homes that were more expensive than they could afford. When the rate reset they could no long make their monthly payments.

Although the rate of ARMs does adjust with time, you can always refinance to either a lower fixed rate mortgage or even another adjustable rate mortgage. Taking advantage of the lower interest rates of an ARM could save you thousands on mortgage interest, giving you more money to pay off the balance of your loan. As a result, you can pay off your home sooner and pay significantly less interest.

Using an ARM to your Advantage

For many people, a traditional mortgage actually costs them money and simply does not make sense. Most people do not live in a home for 30 years, in fact the average time frame is 8 to 10 years. Even if they stay for longer, most people end up refinancing their mortgage at least once and some people refinance every 2 to 3 years. This ends up costing a significant amount in interest because in traditional home loans, you pay the majority of you interest during the first half of the loan term. Also, traditional 30 year loans charge a higher interest rate as a type of insurance for the lender. The lender assumes you will take 30 years to pay off the debt. 30 years is a long time and there is a chance that something could happen that would cause you to default. The lender charges you a higher interest rate to earn more money to keep as a type of insurance against default. The terms on an adjustable rate are only about 1 to 7 years so they can offer a lower interest rate since the term is shorter and less risky for the lender. An adjustable rate mortgage has a much lower interest rate than a traditional mortgage which can save you thousands of dollars over the loan term. Using this type of sub prime mortgage Arizona can save you significant amounts of money and should be considered by both prime and sub prime borrowers alike. Here are a few situations when an adjustable rate mortgage actually makes more sense than a traditional mortgage:

1.       You have bad credit, but you are working on it. An ARM is a fantastic option to help rebuild your credit score. If you know you will be able to qualify to refinance before the rate adjusts, it is a good way to get into a home and start rebuilding your credit score.

2.       You plan to sell your home prior to the rate raise. If you only plan on living in your home for a short period of time, an adjustable rate can save you money. If you sell before the rate raises you will never have to pay the higher interest rate.

3.       You plan to fix up the home and sell it for a profit. If you are not planning a long term investment, an ARM can save you money while you are renovating.

4.       You expect your income to increase. If the loan resets, you will be able to pay the higher interest payments because you will be earning more money.

5.       You expect a windfall. You know you will be able to pay the home off early due to an inheritance. Then the ARM can save you interest while you wait to pay off the home.

There are certain risks for adjustable rate mortgages but these can be minimized by smart investing.

The most important piece of advice regarding ARMs, is to never overextend yourself. An ARM often allows buyers to buy a home that is higher than they could qualify for with a traditional mortgage because the lender looks at the monthly payments. Once the rate resets these can increase and the buyer can actually be priced out of the home they already own. This can lead to default and foreclosure. Talk with a mortgage broker to get the most up to date information about Arizona sub prime mortgage   programs to see what makes the most financial sense for you and your family. 

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Tel:  (623) 582-4444 | Fax: (888) 279-6917

www.level4funding.com
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027