Dan Green, CMPS from Chicago and author of The Mortgage Reports blog, did an excellent post today on…what else? Subprime mortgages. He suggest that subprime borrowers look at refinancing now (if they plan to not sell their home) instead of waiting until the prepayment period is over. His thoughts, which are valid, are that there may not be products available in the future when the time is right for a person to refinance out of their subprime loan. To read Dan’s post, click here.
If you have a subprime loan, you need to contact your Mortgage Planner to see if you can/should refinance now while there are still products available, or if you should work on your credit and wait out your prepayment penalty. Bottom line, you need to be informed of what your choices are:
- Refinance now if you qualify (credit score above 620) and pay the prepayment penalty (typically 6 months interest, which is tax deductible).
- Work on improving your credit score to try to qualify for a better mortgage and wait out your prepayment penalty.
- Do nothing.
Choices 1 and 2 require you to take action and to contact your Mortgage Planner (if you want to use a different mortgage professional, ask friends for a referral). Step 3 can be very costly. Especially if you’re in a market area with declining home values. Locally in Seattle, our market is still strong which cannot be said for many other areas in the nation.
My series on what to do if you have a subprime loan will continue with Part 2: Know Your Score.