A subprime mortgage is a type of loan that will be granted to an individual with a poor credit score. The mortgage is not offered, because the lender views the borrower as having a greater than average risk of messing on the loan. The subprime mortgage is a type of home loan extended or nonexistent credit history. Because the borrowers present a higher risk for the lender, subprime charge interest rates than a standard mortgage. The most common mortgage is the adjustable-rate mortgage which is ARM, which charges a fixed interest rate for a given period and a floating interest rate after.
If you dream of becoming a homeowner, but bad credit is getting in the way of making it a reality, mortgage subprime might be the better option. While these loans are designed for the higher risks borrowers, they do come with some risks of their own. When you apply for a mortgage, the lender looks through your credit and finances to determine your level of risk as a borrower. The subprime mortgage is also known as a non-prime mortgage. They also tend to have higher interest rates and larger down payment requirements than conventional loans.
How Does Subprime Mortgage Works
The mortgage limits legal protections for lenders, as well, which has kept many from operating n the space. The mortgage has put in place is a requirement that any borrower who obtains subprime mortgage must undergo homebuyer counseling through a representative approved by the U.S department of housing and urban development. Lenders must also underwrite subprime mortgages according to the Dodd frank standards. If a lender violates the rule, they can be sued or subjected to regulatory enforcement.
Types of Subprime Mortgage
Here are the types of subprime mortgage available and you can apply for them. When you want and anytime you wish.
- Subprime fixed rate mortgage
- Subprime adjustable rate mortgage
- Interest only loan
- Dignity mortgage
- Subprime mortgage risks
After you have decided, you can now read the next step which is who offers the subprime mortgage
Who Offers Subprime Mortgage
You will not find a subprime mortgage at the biggest banks and credit unions. This is more likely to be available through a portfolio lender or a lender that advertises bad credit mortgages or non-qualified mortgages. You might also see language that indicates a loan program is toward borrowers who have had recent credit events such as bankruptcy or foreclosure. Citadel, subprime crisis, and also Lehman brothers are the largest lender of the subprime mortgage.
How to Apply For Subprime Mortgage
A lender can give you a subprime mortgage if they see you fit. The following are what you can apply for the subprime mortgage.
- Check your credit score yourself
- Get a loan without a credit check
- Check for a good place to start looking for the loan
- Apply at least three or four lenders no matter the type f loan you seek
- Use your credit score to look for lenders who are willing to work with you
Do not feel obligated to seek out dealers that specialize in bad credit, because most dealers work with multiple finance companies, including subprime lenders. They can help you shop around for the best deal you qualify for.