A bad credit mortgage can boost your credit score by over a hundred points once you make the first payment on time. Incredible as this may seem, getting a mortgage is one of the best things that you can do for your credit score. A bad credit mortgage will be a little more expensive in the beginning. There will be a higher interest rate and this will cause your monthly payments to be higher. However, if you use this opportunity to boost your credit score you will be able to refinance the loan in a short period of time to a conventional, low interest mortgage.
Why Would A Bad Credit Mortgage Affect My Score So Significantly?
A mortgage is the most important form of credit you can have. It is a loan against your most expensive asset. When the credit reporting agencies see that you have obtained this coveted credit, they will reward you with a higher score. Home ownership is a sign of responsibility and the credit bureaus view this as an important step to financial security. The type of mortgage you have does not matter. The credit agency is not concerned if you have a bad credit mortgage or a conventional loan. They are concerned with your ability to pay and to make these payments on time.
How Long Until I Can Refinance My Bad Credit Mortgage For A Conventional?
Many high risk lenders will put a clause in the contract stating that the loan cannot be refinanced for a minimum of two years. If this is the case, you will have to wait at least two years to refinance your bad credit mortgage. However, if you do not have that stipulation in your contract you can probably refinance in as little as 6 months. Use this time to rebuild your credit in every way possible and to raise your credit score. That way, once you do apply for a refinance, you will receive the best interest rates.
*Affects pricing. With the No Closing Cost
Option, borrowers finance the closing costs instead of paying for them at
closing. Borrowers who pay closing costs at closing may qualify for a lower
interest rate. Some upfront fees (ex. credit report and appraisal) may apply
and may be credited at closing.
*Refinancing or taking out a home equity loan or line of credit may increase
the total number of monthly payments and the total amount paid when compared to
your current situation.
Copyright MortgageLoansBadCredit.com, All Rights Reserved
