Subprime lenders finance high risk groups to enable them to buy
a home. While you need to be aware of predatory lending
practice, by researching lenders you can find a mortgage loan at
a reasonable rate.
Bad Credit Factors
Before you sign up with a subprime lender, be sure that you
truly have bad credit. There are five factors that determine
your credit score: payment history, credit history, amount owed,
types of credit, and new credit. Each of these factors are
weighted differently, so a series of late payments on one
account may be offset by low debt, no new credit inquires, and
other factors.
A FICO score less than 570 will require you to use a subprime
lender. However, you may be able to still use a traditional
mortgage lender by providing a large down payment, qualifying
you for lower interest rates.
Subprime Financing Versus Predatory Lenders
Subprime lenders offer genuine financing so you can purchase
your home and repay your loan. Predatory lenders seek to strip
your home equity, charge excessive interest rate, and foreclose
on your home.
Predatory lenders will often list their site on public forums in
an effort to lure unsuspecting victims. They will also make
claims that they are the only ones who will lend to you or that
they can fix all your credit problems. Also, beware of lenders
that insist you work with a particular contractor or real estate
agent.
Finding A Good Subprime Lender
To find a good subprime lender, use an online mortgage broker
who will give you quotes from several different lenders. Compare
rates and fees to see which are the most reasonable. Also ask
lenders if they are approved by HUD. With poor credit, you may
qualify for government mortgage insurance.
You should also determine what you can afford to pay monthly and
not feel pressured to borrow more than that. If you are
concerned about monthly payments, look at an adjustable rate
mortgage (ARM), which offers low interest rates initially. An
ARM is also easier to qualify for. However, a fixed rate
mortgage offers long term predictability on how much your
monthly payments will be.
About the author:
See my recommended
Subprime Mortgage Lenders online. Carrie Reeder is the owner
of ABC Loan Guide, which offers help with
loans for people with bad
credit.
