One alternative to subprime mortgages is Fannie Maes Expanded Approval program. This program allows people without perfect credit to get a much better rate and term than subprime programs.

There are 3 levels of the Expanded Approval program.
EA1
Ea2
Ea3

Expanded approval guidelines require the use of escrows for property taxes and homeowners insurance, regardless of whether your Loan to Value, LTV. Normal conforming underwriting usually will not require you to escrow your property taxes and homeowners insurance if you are at 80% LTV or below for a fee of .25% whereas the expanded approval guidelines will require this regardless. The required use of escrows is not a bad thing as it will include everything into your mortgage payment each month and you don't have to come up with large sums of money to pay for your homeowners insurance or your property taxes each year.

 

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