Subprime Mortgages Information

Subprime Mortgages Information



Subprime Mortgages – Information
Undoubtedly,​ you’ve heard the​ radio commercial claiming you​ can get a​ mortgage despite having bad credit .​
Bad credit mortgages are better known as​ subprime mortgages .​
Subprime
Subprime is​ a​ euphemism for a​ borrower who simply doesn’t qualify for a​ traditional home mortgage .​
Subprime loans used to​ be very difficult to​ get,​ but things changed in​ the​ 1990’s .​
Banks began to​ realize there were a​ lot of​ borrowers with less than stellar credit or​ other problems .​
More borrowers meant more revenues,​ so banks started creating subprime mortgages and the​ game was on​ .​
As a​ result of​ these new loans,​ home ownership in​ the​ United States has risen to​ all time highs .​
One of​ the​ biggest determinants in​ qualifying for a​ loan is​ your credit score .​
a​ borrower’s credit history is​ analyzed using a​ FICO score,​ named after Fair Isaac and Company,​ Inc .​
Generally,​ a​ FICO score below 620 is​ considered an​ indication of​ bad credit .​
The borrower is​ then classified as​ a​ subprime borrower .​
Importantly,​ a​ FICO score below 620 is​ not the​ only reason a​ person may be classified as​ subprime .​
An infrequent borrowing history,​ new employment position or​ expensive home may also key the​ designation .​
In fact,​ nearly 50 percent of​ subprime borrowers have FICO scores above 620.
When a​ lender writes a​ mortgage,​ it​ is​ betting on​ whether the​ borrower will repay the​ loan completely and in​ a​ timely manner .​
The better your credit score,​ employment history and so,​ the​ better deal you​ will get from the​ lender .​
Obviously,​ subprime borrowers aren’t going to​ get the​ best deal .​
Instead,​ a​ lender may require a​ larger down payment and will certainly designate a​ higher interest rate than given to​ good borrowers .​
in​ addition,​ subprime borrowers may have to​ pay points just to​ get the​ loan .​
The trade off of​ all of​ this,​ of​ course,​ is​ that you​ get a​ loan to​ buy a​ home .​
Home ownership has consistently proved to​ be one of​ the​ best long-term investments in​ the​ United States .​
While Americans are criticized for failing to​ save money,​ they are effectively doing so by purchasing homes and building equity in​ them .​
Should you​ apply for a​ subprime loan if​ you​ have less than stellar credit or​ other problems? There is​ no right answer,​ so you​ should consider sitting down with an​ independent mortgage broker to​ analyze your situation.




You Might Also Like:




No comments:

Powered by Blogger.