Sub-prime mortgages offer financing for those with poor credit
to finance the purchase of a home. Today's sub-prime mortgages
offer low down payment options with no private mortgage
insurance (PMI). As a result, more people are finding it easier
to buy a home.
Sub-prime Mortgage Options
Sub-prime mortgages come in as many flavors as conventional
loans. Just like with a conventional loan, low down payments or
zero down will increase your interest rate. However, you have no
PMI premiums to pay.
Another option is to buy points to lower your interest rate as
well, but this only makes sense if you plan to keep your
mortgage for seven or more years. A better plan is to improve
your credit score, and then refinance in two to three years for
a conventional loan.
Sub-prime Lenders
More and more financing companies are offering sub-prime
mortgages. Even Freddie Mac and Fannie Mae offer sub-prime
programs. So to find the best rates and terms, you should
request quotes from both conventional and poor credit lenders.
When you are comparing lenders, look at the APR for a quick
check. The APR includes both interest rates, points, and fees.
However, you will also want to look at terms, making sure there
are no fees for refinancing or early payment.
To quickly gather this information, make use of the internet.
Most lenders offer quotes online. You can also request quotes
from a mortgage broker, who will provide you with several quotes
at once. When you find a lender with a competitive bid, you can
request more information or apply online for speedy approval.
Sub-prime Benefits
Subprime mortgages provide you the chance to purchase a home
while improving your credit history. Instead of throwing your
money away on rent, you are building up equity in your home that
you can tap into latter. You can also deduct your interest from
your taxes.
Regular mortgage payments will also improve your credit history.
So not only will your rates improve with other types of credit,
but you can also refinance your mortgage in a couple of years
for lower interest payments.
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.
