Hybrid Mortgage Loans for Bad Credit Homeowners

Hybrid mortgages allow homeowners with poor credit a temporary period of low mortgage payments to rebuild their credit. These hybrid mortgages are offered by specialty mortgage lenders known as "sub-prime" mortgage lenders. If you are considering using your mortgage to rebuild your credit here are some tips to help you.

Hybrid Mortgage Loans

Hybrid mortgage loans are a special type of Adjustable Rate Mortgage that comes with an interest rate as much as 2% lower than traditional mortgage loan. Hybrid mortgages offer a fixed introductory interest rate for a period of time specified in the loan contract, often three to five years. At the end of the introductory period the loan is converted to a standard Adjustable Rate Mortgage at the prevailing interest rate.

Once the mortgage lender converts your Hybrid mortgage you will want to refinance to a traditional mortgage to take advantage of your improved credit rating. It is important that the Hybrid mortgage you choose does not have a prepayment penalty. Mortgage lenders often charge penalties if you refinance or sell the property before the penalty expires. If you have poor credit you may not qualify for a mortgage without this penalty; try and choose a mortgage with a penalty that expires before you will be refinancing the loan.

Finding a Sub-Prime Lender

Hybrid mortgages are offered by a variety of mortgage lenders. The interest rate you qualify for will depend on the state of your credit and how much shopping you have done for the best loan offer. It pays to shop around from a variety of mortgage lenders and compare all aspects of the mortgage offers you are considering.

Once you have the hybrid mortgage, concentrate on making all of your payments on time and paying off other debt. You can improve your credit score significantly by maintaining low balances on your credit cards and paying bills on time. You can learn more about your mortgage and credit options by registering for a free mortgage guidebook.

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