Sub Prime Mortgage Loan How Sub Prime Loans Differ From Conventional

Sub Prime Mortgage Loan How Sub Prime Loans Differ From Conventional Loans

Sub-Prime Mortgage Loan - How Sub-Prime Loans Differ From Conventional Loans
Sub-prime mortgage loans offer more flexibility than their conventional mortgage loan cousins .​
With terms determined by Freddie Mac and Fannie Mae,​ conventional loans have strict guidelines on​ loan amounts,​ terms,​ and PMI requirements .​
With sub-prime mortgages,​ lenders can provide more choices with an​ increase in​ rates.
The Limits Of a​ Conventional Loan
Conventional loans are often sought for their low rates .​
But those low rates come with limitations .​
Freddie Mac and Fannie Mae buy mortgages after they have been processed by a​ financial company .​
This frees up money for the​ lender to​ make more loans .​
However,​ Freddie Mac and Fannie Mae have tight guidelines on​ what types of​ loans they will purchase.
Among these limitations are caps on​ loan amounts .​
In 2018 the​ limits were set at​ $417,​000 for a​ single family house .​
Every year these caps are reevaluated .​
Conventional home loans also require you​ to​ carry private mortgage insurance if​ you​ borrow more than 80% of​ the​ home’s value.
To qualify for a​ conventional mortgage,​ you​ must have good credit,​ cash assets,​ and steady employment history.
The Options Of a​ Sub-Prime Loan
Sub-prime home loans provides financing for those with poor credit or​ unusual application terms .​
This can include jumbo loans,​ exceeding the​ limits of​ a​ conventional loan .​
People with unusual or​ unpredictable jobs may also find an​ easier time getting financing with a​ sub-prime lender.
Sub-prime mortgage terms are determined by the​ individual lender .​
So you​ can get a​ zero down loan with a​ poor credit score .​
You can also find near market rates by placing a​ large down payment at​ closing .​
Private mortgage insurance is​ not required with a​ sub-prime mortgage,​ potentially saving you​ hundreds a​ year in​ premium costs.
Getting the​ Right Mortgage For You
Most financing companies handle both types of​ loans,​ so you​ can easily get quotes for both types .​
To find the​ right mortgage,​ you​ have to​ take the​ time to​ crutch the​ numbers.
Look at​ the​ APR to​ determine the​ total cost of​ the​ loan .​
But also factor in​ any plans to​ move or​ refinance in​ the​ future .​
By turning over your home loan in​ a​ few years,​ you​ don’t want to​ pay out large application fees for low rates that don’t have time to​ save you​ money

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