Subprime Mortgage Loan Information

If you are someone that wants to purchase a home but your credit rating is severely marred by late or missed payment on credit cards or defaults on some type of loan, then you should probably think twice before considering purchasing a home. Even though it will take some time, you can clean up your credit history by making your current payments on time and paying down all of your debt balances. If you are determined to purchase a home before cleaning up your credit history, there is the subprime loan. This is a type of mortgage that is sometimes made to a borrower with extremely poor credit that cannot qualify for any of the government or conventional loans. According to an article in USA Today in a decade these subprime loans showed a growth rate of twenty-five percent which was much higher than the prime loan rate.
These subprime loans are an extreme burden and risk to lenders. Due to the fact that the borrowers of these loans are poor credit risks and do not pay even their smaller bills on time, it is not a surprise that the delinquencies in this type of loan was up nearly eight percent for sixty days late. Twenty percent of the loans made during the period of 2005 through 2006 are predicted to fail completely. The borrowers Financing A Startup on subprime loans that pay their monthly payments pay highly for those that do not because the lenders compensate for the losses in the following ways: 1) lenders charge much higher interest rates, even as much as six percent higher than for a regular loan type; 2) lenders require higher down payments over the twenty percent normal down payment; and 3) most of these loans have much higher closing costs and fees.
Most of these subprime loans have an extremely high prepayment penalty due to the fact that borrowers treat them as a short-term solution. It is important for the borrower to realize that there is a prepayment penalty when they take out this type of loan because this is how the lenders keep borrowers from refinancing into a lower interest rate loan. Regardless of this fact, it is recommended that borrowers try not to stay with this loan after they have been making their mortgage payments on time for a certain period of time.
Also, if the borrower has maintained paying their other debts on time and have paid some of them off, they should try for a refinancing of their loan. Obviously, if they can do this it will save them on their interest rates. It has been estimated by Freddie Mac that up to fifteen percent of the subprime borrowers have credit scores high enough for How To Save Money While Paying Mortgage them to qualify them for a better loan with lower interest. This is the reason any prospective buyer should never take the first loan offer they receive. Even though they realize their credit is bad it is still always a good idea to shop around. Doing so can sometimes same a borrower thousands of dollars in high closing costs and interest rates.

READ  How No Credit Check Loans Can Improve Your Financial Situation