We have been talking about this since the beginning of this blog. Ladies and gentlemen, let me introduce you subprime mortgage lenders – these guys are easier to qualify with than most existing conventional or traditional lenders. What is really important (and I mean it!) is that even if you have a foreclosure or bankruptcy on your file, you can still buy a home and live in this world with a stable roof above your head. The second interesting aspect is that their rates are also quite competitive, especially if adding up several down payments and shop rates. The next three tips that I am about to share with you guys will help you get approved, especially if you are one of those people with low rate home loans. So, let’s begin.

1. Checking Your Credit Report is Crucial

Check this out folks. Paying extra interest rates for mistakes committed by your creditors is not only stupid, it is absurd. Verifying your credit report in your files for any errors or inaccurate information is a must do if you are serious about qualifying for a loan. Most credit report firms or agencies out there are directly responsible for fixing any mistakes, so letting them know in written form as soon as you have spotted the mistake is a must do. If you have the possibility you must also let the information provider know too.

Having a bankruptcy or a foreclosure issue in your financial past is something that most people experienced and there is no way to hide from something like this (well unless you change your identity . That’s why, when trying to get approved by any subprime mortgage lender company you have to make sure that you include a well (professionally) written letter in your report for a quality explanation of the situation that appeared. Most of the financing companies that I personally had the chance to deal with looked quite favorably and had nothing to say when dealing with a bankruptcy caused by a job loss, illness or injury. This is normal, they are humans too and they understand that it happens from time to time.

2. Never Underestimate the Power of a Down Payment

Yes folks, a down payment really helps and I’m not the first or the last one to mention this. Improving your application with an existing down payment is also real. You just have to know and to realize which method qualifies better. While ten percent (10%) is the most common, twenty (20%) will always act better and will get you approved for much better rates. If you do not agree please make sure that you mention why in the comments bellow this article. In order to succeed in getting approved you are going to need to understand how it works. You see, down payments always decrease the possible risks for lenders, that’s why they constantly rate your loan application differently. They also run a business and they are required to stay safe.

Paying off certain old debts and deleting unused accounts is also something that can be done in order to improve your credit score. Please take a piece of paper and a pencil and note down that by increasing the available cash reserves (when cashing stocks or other investments you have) you also have the chance to improve your score. This is how professionals do it and this is what you should also try if you are serious about reaching your goal.

3. Qualifying for Adjustable Rate Mortgages is a Joke

While most of the people don’t want to understand it, subprime lenders do offer a certain variety of financing packages and adjustable rate mortgages (ARM) are probably the easiest to qualify for. Try it for yourself if you don’t trust me. The reason that you are able to qualify for more is because their monthly payments are the lowest in the market (well at least in the beginning). By following the above mentioned tips and taking advantage of truly affordable interest rate you are going to be able to soon move in a new house; however, be aware that your payments can double or triple in a few years. Be aware!

Have you ever heard of smart shopping? This is a method used to locate the lowest costing loan out there. By comparing the adjustable percentage rate (APR) of certain mortgages you have the chance to stay out and not get caught by those nasty hidden fees that most people often stumble upon and basically have no clue what to do with. Even if you have a bad credit score and that ugly financial background of yours is giving you a headache, you should still look at traditional or also called conventional lenders, because who knows, you might have the chance to convince them and qualify. Many of those that I personally had to deal with are still providing quite interesting and competitive loans to those people with adverse credit scores. Can you imagine something like this? Anyway, just remember that any citizen of USA has the chance to improve his or her credit and lead it to a good standing never seen before point in approximately two years and by doing that to refinance for better existing rates.

To be continued…

Billy,
ChateauMortgage.com

Let’s begin by mentioning that what subprime mortgage lenders really do is specializing in offering financing to people with poor, horrible, low, terrible credit or any other type of pretty risky loans that traditional lenders would refuse to. While conventional lenders that you had to deal with till this very moment mainly concentrate on all the possible low risk loans that are available out there, as well as the same type of borrowers (people with a clean financial background), subprime lenders will constantly strive to increase the interest rate and prepayment fees and will lure people with a bad financial situation. Anyways, while most of the people manage to find better rates (honest) with traditional lenders, subprime type of companies make the real difference by providing a larger scale of flexibility when talking about various types of requirements and loan terms.

Qualifying for Subprime Mortgage Loans is Easier

Another major difference between loans that you get from subprime mortgage companies and traditional lenders is that the first ones are much easier to qualify for. Everyone is aware of the fact that it is merely impossible to have a perfect financial background and an impeccable credit score. That’s why even simple people who have a simply job and are late with paying their old loans can qualify for borrowing money from subprime lenders. The second good part relies on the aspect that since these guys accept a much higher level of risk, they also provide a larger variety of loan packages. As an example I’m going to mention that even someone with a really terrible credit might still find a solution for a zero down thirty year mortgage loan. Can you imagine something like this when dealing with other traditional lenders? I really doubt it!

For those really big (also called JUMBO) or any other unconventional types of loans, you may have to work with a subprime lender and this is fine (at least for me). You see guys, the problem is that these types of loans are quite hard to sell to the secondary markets out there, most traditional lenders simply won’t accept to handle them. This is the difference.

It’s all about the Higher Rates

So what do you think will happen when these subprime mortgage lenders allow an increased level of risk for the offered loans? Well, the answer is pretty simply. They are inevitably going to charge a higher interest rate.  However, if you have the time to analyze all these processes closely you are going to realize that we are talking only about a couple of points more than a conventional loan that you got used to in the past. Don’t be amazed when you stumble upon more fees or points because this is something normal, especially in that particular case when you are searching to waive for early payment fees. While traditional lenders offer the best existing loan rates and reasonable fees in the whole market, subprime lenders offer a wider range in rates and fees plus the fact that they deal with those people that conventional lenders don’t even want to see in front of their eyes.

Here is a tip folks. No matter what type of financing you are striving to qualify for, you should always look to request quotes from dozen of possible lenders. This measure is going to protect you in the long run from different existing scam combination and companies that are looking to make a profit even on the honest citizen with a simple job. This is going to help you ensure that you are getting the best possible package as well. The art of locating a low rate loan when dealing with subprime mortgage lenders is probably the easiest way of saving yourself all the possible hard earned money.

Forget about Private Mortgage Insurance

Subprime lenders offer you the chance to forget about PMI (Private Mortgage Insurance). They simply don’t require it, like most conventional lenders do. This can save you at least one hundred dollars on your required monthly payment. Do you see the difference?

PMI is usually required for traditional type of loans (A loans) when you are dealing with a down payment less than twenty percent (20%). Getting around this requirement with old school (conventional) lenders is also possible by handling two mortgages from two separate companies. Another trick also exists and it consists of the option of putting 20% down on your standard loan, but taking out a home equity one after the deal is done in order to gain access to your cash.

For simple citizens and people who are not into financing and credit stuff, things are getting more and more confusing on a daily basis. Nowadays, most conventional lenders that I personally know are entering the subprime market. However, one thing is clear, before appealing to subprime lenders, you still need to ask for quotes from traditional ones, because who knows, you might be surprised when they say that you qualify. Experimentation is the key to success even when dealing with subprime mortgage loans

Billy,
ChateauMortgage.com