Level 4 Funding

Phoenix Arizona Hard Money Lender

Using Adjustable Rate Mortgages and Other Subprime Loans to Your Advantage

Having bad credit can make it almost impossible to get a home loan but there are lenders that offer programs for a bad credit mortgage Arizona. There are different options available to help subprime borrowers that can also be taken advantage of by borrowers with good credit.

Close to 42 million Americans have bad credit, which is approximately one quarter of all individuals with active credit accounts. This is defined as a score of less than 640 and can make it difficult to qualify for a car loan, home loan, credit cards, and even store accounts. For many individuals with bad credit, buying a home seems impossible. However, many mortgage brokers offer bad credit mortgage Arizona programs to help Arizona residents qualify for home loans.
One type of loan that is available for people with bad credit is an adjustable rate mortgage or ARM. An ARM is offered to subprime borrowers who would not qualify for a traditional loan. It offers a low interest rate at first but then resets to a high interest rate after a specified period, usually 1 to 7 years. Once the rate adjusts your mortgage payment will increase due to the higher interest rate. This can be a good option if you only plan on owning the property short term or if you know you will be able to qualify to refinance your loan at the end of your low rate period. Although an ARM is a type of bad credit mortgage Arizona, it can also be beneficial for borrowers with good credit.

A second type of loan is a type of FHA loan. An FHA loan is backed by the government and will allow you to borrow about 96.5% of the value of the home you are purchasing. This means that you won’t have to come up with a large chunk for a down payment. In addition, the government backing means that you will be more likely to qualify, even with less than stellar credit. You will pay monthly insurance on your loan. In addition to you principle and interest payments, you will also pay a PMI insurance payment. This will increase the amount of your monthly mortgage payments until you pay off 20% of the loan amount. You can also couple FHA loans with different federal programs that offer down payment assistance or cash back at closing like Home in 5. These programs are constantly evolving and changing, so make sure to talk with a mortgage broker about what you may qualify for.
 A third type of bad credit mortgage Arizona that is available is a hard money loan. A hard money loan is secured through a mortgage broker but is backed by investors instead of a bank. This is especially beneficial for people looking to do a fix and flip or short term purchase. Depending on the merit of the property you are purchasing as well as potential for income, investors will often invest capital, even if your credit score is lower than what is ideal. It should be noted that hard money loans are short term loans only. They cannot be used to purchase a home you plan to live in for any significant amount of time. These are designed primarily for real estate investors.
For some borrowers, a bad credit mortgage Arizona  is the only option they have to purchase a home. However, some of these bad credit loans can benefit traditional borrowers as well. Specifically, an adjustable rate mortgage. An ARM can save you thousands of dollars in interest over the life of your loan and makes sense in certain lending situations. Here are five situations that could benefit from an adjustable rate mortgage:
1.       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.
2.       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.
3.       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.
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 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.
Talk with a mortgage broker to determine if an ARM or other bad credit loan is right for you.
Whether you need to rebuild your credit or are in a situation where you could benefit by taking advantage of a bad credit loan, a mortgage broker can help you determine the right product for you.

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Tel:  (623) 582-4444 | Fax: (888) 279-6917
http://www.level4funding.com
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027
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