Sub-Prime Mortgages

In my practice as a loan officer, I have occasion to recommend what I call a "Strategy Loan" or "Band-Aid" loan.

The purpose of the loan is to get the client out of a financial hardship while we spend time rehabilitating their credit. In the past five years, a 2 year fixed rate, adjustable mortgage fit the plan. In markets like we are experiencing now, I would place a client into at least a 3/1 or 5/1 ARM loan.

For most people, those who faithfully work a credit rehabilitation program, credit scores can be built up and credit repaired over the first two years. This would get the borrower ready to refinance to an "A Paper loan".

Another option can be a 30 year fixed that pays a rebate of interest payments to the borrower for perfect payment history. As an example, a full year of perfect payments can knock the interest rate on the loan down from say, 7.5% to 7%. The second year of perfect payment history would bring it down to 6.5%. This way, and remember this is only an example, there is no need to refinance.

It is really important to work with a loan officer who listens to you and what you have planned for the next five years. Most home owners do not keep a mortgage longer than five years, (historically over the past 15 years) but with appreciation in home value slowing up, it is likely that the average will stay within that five years again.

With the high cost of everything now-a-days, it's even more important to plan ahead. Be sure that your loan officer is listening to you and asking you the types of questions that will get you the best loan for your needs. And if they aren't doing that, then give me a call."?

Learn to rehabilitate your credit at www.CreditFitness.net.