Among the many loan programs available today are programs for borrowers who do not have "A" credit ratings. Non "A"Sub or B/C/D loans have become more common place over the last few years.
B/C/D programs accept borrowers who may have experienced a wide range of credit problems. Acceptable credit problems can range from people who have just recently had bankruptcies discharged to those with credit card charge offs, to those that have had a recent 30 day late mortgage payment.
In cases such as these a B/C/D loans may be the only means of financing a new mortgage.
These loans charge a significantly higher interest rates than those programs with "A" credit and just how much will depend on the program and the severity of the borrowers credit issues.
These loans usually come in three types of terms:
6 Month Adjustable Rate Mortgages
* The loan will adjust every six months
2/28 Year 2-Step Loans
* fixed for 2 years then adjust for another 28 years
30 Year Fixed rate Loans
* fixed for the life of the loan
These loans are best used as short-term fixes. Typical borrowers will choose the program that will provide an immediate short term mortgage just for the time period it takes to repair credit, after which, they can refinance to a program with a lower interest rate. These loans can be as much as 4% higher than the standard A credit (conforming) loan, and may vary up to 3% between the 3 examples provided. Due to this fact it is imperative to review your credit with your Loan Officer and determine which program will bridge the time period it takes to straighten out your credit.
REPAIRING CREDIT ISSUES
Bankruptcy: Must be discharged for 4 years
Credit Card Charge Off's: Must be charged off greater than 2 years ago and paid prior to closing
30 day Late Mortgage Payments: None in the past 12 months and no more than 1 in teh last 24 months
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