What Is A Sub Prime Loan

What is​ a​ Sub Prime Loan?
A sub-prime home loan is​ designed to​ service those individuals and families who have credit problems .​
The severity of​ the​ credit problems and the​ length of​ the​ problems will determine whether or​ not you​ are a​ candidate for a​ sub-prime loan .​
There are some individuals who may not qualify even for this type of​ loan.
The sub-prime home loan market often seems to​ have a​ life of​ its own .​
At times,​ it​ is​ easy to​ find a​ sub-prime loan through a​ lender while at​ other times,​ when the​ market tightens up,​ it​ can be difficult to​ get a​ sub-prime loan .​
In other words,​ there are no guarantees that a​ sub-prime home loan will be available at​ all times .​
Much of​ that is​ determined by the​ overall housing market and borrowers have little they can do to​ change that other than to​ wait for the​ markets to​ settle down.
Generally speaking,​ sub-prime mortgages are for those with credit scores under 620 .​
On average,​ most credit scores will range from 300 to​ 900,​ with most working people being somewhere in​ the​ 600 to​ 700 range .​
Individuals who are always late paying their bills,​ and especially those who are 30 to​ 90 days late,​ will have a​ much lower credit score .​
When the​ credit score falls below 620,​ the​ person is​ considered a​ sub-prime candidate .​
Keep in​ mind,​ however,​ that this number can change as​ the​ market changes .​
It may go up a​ bit and it​ may go down a​ bit.
It should be remembered that at​ times it​ can be impossible or​ at​ least very difficult to​ get even a​ sub-prime loan .​
If sub-prime home owners begin to​ default on​ their loans (and this can happen) lenders will often restrict or​ even eliminate their sub-prime exposure by refusing to​ take these types of​ loans.
There are some issues that consumers need to​ be aware of​ when considering a​ sub-prime home loan .​
Here are some of​ the​ more important ones.
Sub-prime loans almost always carry a​ higher interest rate than traditional loans (which are also known as​ prime loans) .​
Because the​ lender is​ assuming much more risk with a​ sub-prime borrower the​ amount of​ interest that can be charged is​ often up to​ the​ lender .​
There is​ no general way to​ gauge what might be known as​ the​ average rate .​
Each lender that you​ are interested in​ will need to​ be contacted in​ order to​ learn the​ rate they will charge you.
A sub-prime loan may also carry with it​ a​ prepayment penalty,​ a​ balloon payment,​ or​ both .​
Prepayment penalty fees are charged if​ the​ loan is​ paid off early .​
a​ balloon payment requires the​ borrower to​ pay off the​ entire balance of​ the​ loan after a​ certain period has passed,​ often five years or​ ten years .​
If you​ cannot pay the​ entire amount when the​ balloon payment is​ due,​ you​ may have to​ either refinance the​ loan or​ sell the​ house or​ go into foreclosure.
Anyone who is​ considering a​ sub-prime loan should be aware of​ predatory loans and predatory lenders .​
There are several ways someone can cheat you​ through predatory tactics,​ and sometimes a​ lender will combine them in​ order to​ confuse you​ and to​ maximize profits .​
Be especially aware of​ high fees and interest rates that are ultra-extraordinary.
You can take some actions to​ defend yourself against predatory lenders .​
Start by finding out what your credit score is​ from a​ reliable source .​
Then ask people for referrals to​ mortgage lenders whom they trust and have dealt with before .​
Lastly,​ make sure that you​ shop for the​ best deal and that you​ check on​ the​ lender before you​ sign up with anyone.

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