Credit Comeback Mortgage Loans--See if One is Right for You

Sheryl Landrum
LoanBiz Columnist


Poor credit can make it difficult to find a good home loan. However, there is a new alternative to sub-prime mortgages; it is called the Credit Comeback Loan and it just might be what you need to purchase that new home or refinance your existing mortgage.

How does a credit comeback loan work, and when should you apply for one?

Credit Comeback Loans: How They Work

Let's take a thirty year fixed-rate mortgage. When doing a credit comeback mortgage loan, your interest rate will begin at a rate 1.5% higher than a "prime" mortgage loan. However, if you make your house payments in a timely manner each month, your loan rate will reduce by .375% after the first year. This same principle applies each year up to a period of 4 years. At the end of the 4th year of your mortgage loan, you will have dropped your interest rate by 1.5% to 6%, where it will stay for the duration of your home loan.

Credit Comeback Loan Application

Sub-prime, or alt A, mortgage loans usually come with high interest rates and poor loan terms. Often homeowners with such loans are forced to refinance within a few years--at higher interest rates and substantial costs. So if poor credit is qualifying you for a mortgage interest rate of 7.5% or more, ask your loan officer if you qualify for a credit comeback loan.

Not only can a credit comeback loan save you money, but it can also allow you to stay in a good home loan without the cost of refinancing your mortgage or losing a good mortgage interest rate.

About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage in San Diego and Prudential Realty in Bonsall, California.