case if you have bad credit, your options for a mortgage lender
may be limited. As a matter of fact for the most part, traditional
mortgage lenders prefer applicants with a high credit score.
According to experts if you do not match their criteria, you
will likely have to obtain a mortgage from a sub prime lender.
There is no denying that subprime loans lenders provide a valuable
service. In simple terms their goal is help those with bad credit
and no credit get approved for a home loan. While it is worthwhile
remembering that most sub prime lenders are eager to help, it
is important to discern lenders that are trying to take advantage
of your situation.
What are Sub prime Lenders
In a nutshell, one can safely say that subprime
loans lenders approve mortgage loans to people whom traditional
mortgage companies consider undesirable candidates. It is worth
mentioning in this regard that to get a loan through a mortgage
company, bank, or credit union, applicants must have a good
credit score, down payment, and the ability to pay closing costs.
Whereas there is no hiding the fact that many traditional lenders
have begun to offer sub prime loans, a home buyer may obtain
more loan options by using a lender that specializes in sub
How to Locate a Sub prime Lender
Theoretically speaking subprime loans
lenders can be found in any area. Believe it or not for your
convenience, you may locate a sub prime lender online. Point
to be noted in this regard is that many online home loan companies
offer bad credit mortgages to all types of people. Moreover,
it is worthwhile remembering that the application process is
simple. As a matter of fact, responses are received within a
Tricks and Schemes Used by Some Sub prime Lenders
If experts are to be believed individuals purchasing their first
home should proceed with caution. On the other side of the coin
if using a sub prime lender, beware of shady lenders. In simple
terms lender tricks are common. Unfortunately, fact remained
that many unsuspecting buyers fall prey to these schemes. In
an ideal scenario typical schemes involve lenders advertising
unrealistic lowball offers to get clients in the door. In case
if it sounds too good to be true, it probably is.
Additionally, it is worth pointing that some lenders fail to
mention certain fees until closing. Hence, it is of utmost importance
that homebuyers must pay unexpected out-of-pocket expenses.
Furthermore, always remember that some lenders take advantage
of fluctuating interest rates. In case if mortgage rates decline
before your loan rate is locked, the lender should decrease
your quoted rate. However, fact of the matter is some lenders
keep rates the same. To avoid this, it is quite mandatory that
homebuyers should study the market.
How to Avoid Lender Scams
There is no denying that the best way to avoid a lenders scam
is not to accept the first offer you obtain, and request quotes
from several lenders. Theoretically speaking if possible, work
with a reputable mortgage broker. Believe it or not brokers
have dealings with various trustworthy sub prime lenders. More
often than not the objective is to provide homebuyers will numerous
offers from prospective lenders. In addition once receiving
quotes, you have the power to choose the most attractive sub
According to experts subprime loans
lenders finance high-risk groups to enable them to buy a home.
While there is no hiding the fact that 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
As a matter of fact before you sign up with a sub prime lender,
be sure that you truly have bad credit. In an ideal scenario
there are five factors that determine your credit score: payment
history, credit history, amount owed, types of credit, and new
credit. Theoretically speaking 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.
Because of this simple reason a FICO score less than 570 will
require you to use a sub prime lender. However, fact remained
that you may be able to still use a traditional mortgage lender
by providing a large down payment, qualifying you for lower
Sub prime Financing Versus Predatory Lenders
Point to be noted in this regard is that Sub prime lenders offer
genuine financing so you can purchase your home and repay your
loan. On the other side of the coin Predatory lenders seek to
strip your home equity, charge excessive interest rate, and
foreclose on your home.
In addition Predatory lenders will often list their site on
public forums in an effort to lure unsuspecting victims. Believe
it or not 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, it is advisable that you beware of lenders that
insist you work with a particular contractor or real estate
Finding a Good Sub prime Lender
In an ideal scenario to find a good sub prime lender, use an
online mortgage broker who will give you quotes from several
different lenders. It is of utmost significance that you compare
rates and fees to see which are the most reasonable. In addition
also ask lenders if they are approved by HUD. It is worth mentioning
in this regard that with poor credit, you may qualify for government
In simple terms you should also determine what you can afford
to pay monthly and not feel pressured to borrow more than that.
In case if you are concerned about monthly payments, look at
an adjustable rate mortgage (ARM), which offers low interest
rates initially. Believe it or not an ARM is also easier to
qualify for. However, fact remained that a fixed rate mortgage
offers long-term predictability on how much your monthly payments
will be. This can turn out to be a blessing in disguise for
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