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Subprime Home Loans
There IS Hope For Less-Than-Perfect Credit
Do you have less-than-perfect Credit? Did you know that you may actually still be able to get a home loan even though you have credit problems? Borrowers with flawed Credit History are defined as subprime. If you have outrageously bad credit problems, such as a recent Foreclosure, then you will most likely be prevented from getting a home loan. A little known fact is that lesser credit flaws won't necessarily stop you from getting a home loan. Recently, industries of subprime Mortgage lenders have sprung up to serve the many people who have credit problems. Most subprime mortgages are legitimate, but a subset of them, called predatory loans, harm borrowers.Low Credit Score
Borrowers with credit scores under 620 generally fall under the subprime category. Credit scores range from about 300 to about 900, with most consumers landing in the 600s and 700s. Those who are consistently late in paying bills, and especially those who falls behind on debts by 30, 60, or 90 day or more suffer from a plummeting credit score. If it falls below 620, that consumer is in subprime territory.
Not many lenders will use the Term "subprime" to describe you or your loan, because it's considered bad salesmanship. You may hear the word "nonprime" or, you may not even hear the word used at all. People with excellent credit end up with mortgages with rates that don't vary much from Lender to lender for equivalent loans. With subprime mortgages, you might receive widely differing offers from different subprime lenders because they have different ways of weighing the risks of giving you a loan. Make sure that you shop around and compare the different loans available to you when your score is less than 620.
High Rates
Subprime mortgage loans differ from equivalent prime loans in that they have higher rates. Many factors are considered by the lender in a process called "risk-based pricing" when they come up with mortgage rates and terms. This is why it is impossible to generalize about subprime rates. We know that they are higher, but how much higher depends on factors such as credit score, size of Down Payment, and what types of delinquencies the Borrower has had in the recent past. From a mortgage lender's standpoint, late mortgage or rent payments are worse than late Credit Card payments.Paying Off Early
Subprime mortgage loans also differ in that they have a Prepayment penalty, a balloon payment, or both. A fee assessed against the borrower for paying off the loan early (the borrower sells the house or refinances the high-Rate loan) is the prepayment penalty. A balloon payment requires the borrower to pay a lump sum payment of the unpaid Principal remaining at the term of the loan, often five years. If the borrower cannot pay the entire amount when the balloon payment is due, he or she has to refinance the loan or sell the house.Click Here To Get Your FREE Credit Report