Subprime Loan - Subprime loans are not just for people with less than perfect credit. While many subprime loans are used for people with not such good credit, many are also used for creative financing, unique situations, and for loans that dont meet traditional conforming guidelines (conforming loans are generally for people with good credit).

Sometimes the subprime market will offer up better interest rates for a borrowers unique situation, than could be achieved applying for a mortgage with a prime(AAA) lender, Even if the borrower is not considered to be subprime.

Subprime loans are also referred to as nonconforming loans, because they do not conform to standards set forth by Fannie Mae or Freddie Mac, the two largest purchasers of mortgage backed securities.

There is a wide range when it comes to the interest rates of sub prime lenders. It is your mortgage brokers job to shop your loan to multiple sub prime lenders and obtain the best deal for you. Most sub prime loans are written as 2 or 3 year ARMS.

There are many different sub-prime programs available. There is much more flexibility on documentation required. A good example is a VOR (Verification of Rent), may not be required using certain subprime lenders. This makes it easy to finance someone that can't verify their rental history. There are many more examples of subprime programs!

Because "subprime" is another word for "non conforming" financing anything that does not conform to Government Sponsored Entities (GSE's)lending guidelines, such as those for FNMA and FMHLC, fall into this category. Although credit may be the first indicator to some how a loan is underwritten or graded, other important factors play part too, such as loan amount. The FNMA conforming loan limit for 2006 is $417,000. If your property is in California where the average home value could be as high as $490,000, you will never be able to qualify for conforming financing without splitting the loan into two balances, thus splitting up the risk for the investors. Loans over the conforming loan limits are commonly called "jumbo" and "super-jumbo" loans, and sometimes even "luxury" home loans. All of these types of loans fit into lending perimeters of non-conforming and subprime financing, sometimes also referred to as "niche" lending.

Sub-prime, or sometimes refered to as non-prime, lenders are often the source for loans that are secured by non-warrantable condominiums and cooperatives. Non-warrantable condos and coops are projects that do not meet the criteria set by Fannie Mae and Freddie Mac and therefore the mortgages secured by these type of condos and coops are not eligible to be delivered to FNMA and FHLMC. Sub-prime mortgages are sold to investors who do not have such criteria.

Subprime loans are also known to close faster than their counterparts. These loans are often the first choice of borrowers who are in situations where they need fast closings.

Subprime loans are able to close faster because the underwriting guidelines are not as strict as conventional lenders. Looser guidelines allow for faster closings. Where a conventional lender may require two years worth of a verification of rent, by a management company, the subprime lenders may allow you to have a twelve month VOR from a private party. It is little things like this that may require you to go subprime for the time being.

Non prime loans will also allow you to purchase a home immediately after bankruptcy, after a foreclosure, allow collections, disregard consumer credit lates or many other options that you may not be aware. If there are any questions please contact us for your consultation.

Are you a subprime or conventional borrower? - Everyone wants the best interest rate available when getting a mortgage. Some people think that low interest rate they see advertised on tv or the radio is available for everyone. This simply isnt the case. Before applying for a mortgage you should evaluate your current credit and financial situation so there are no suprises when you apply.

Another issue that lenders look at is your tradlines and thier history. It is possible to have a very good score with no accounts showing up on your credit report. If that's the case you may have to get a subprime loan.

Even if it is determined that you are a sub-prime borrower due to a variety of factors, you may still qualify for a great rate. There are many banks who are very aggressive in this marketplace who want this business. The best approach is to contact a mortgage broker, who has access to numerous programs through many different banks, to find out the absolute best program you can qualify for.

A loan approval is based on several factors such as your credit, assets, equity, income to debt ratio, and the type of property. If you change anyone of these factors your approved rate could change (go up or down). Proper planning with your mortgage advisor will go a long way to accomplish your goals of getting the best possible rate.

Even if you have prefect credit and an 800 credit score this may not guarantee you the absolute best rate out there. Consider the type of financing you are looking for. If you are looking to buy a home but you have no money for a down payment or closing costs and you can not show adequate income documentation to qualify you, then you may need to use more of a "creative financing" type loan. You may need to go with a stated, no documentation, or no ratio type loan. Match that with the fact that you also have to go with 100 percent financing and you could be looking at a rate that is 1-3 percent higher, if not more, than the best rates out there. Therefore, even though you have excellent credit and a great credit score you could still need to obtain a subprime loan because loan approval is not based on just credit and credit scores alone. There are many other factors that effect what type of loan you will qualify for. Therefore, consult a mortgage professional early on when looking to buy a home to find out what kind of borrower, subprime or conventional, and loan will be best for you so that you can look for homes that will fit within your budget for the mortgage that you will qualify for.

How easily can you document and prove your income? Many conforming borrowers can prove their income with their tax returns and W2s. Other borrowers have complicated pay structures, are self employed, are paid on commission, or do not pay taxes on their income. If this is the case then a subprime loan with relaxed income documentation may be best. There are even some loans that require no income documentation and no job history to qualify granted you have a strong credit profile and good credit scores.

Normally, the difference between subprime borrowers and conforming borrowers is their credit score. Lower credit scores (under 600, generally) means the borrower is subprime. Subprime mortgages have higher interest rates.

Are Subprime Mortgages Bad Loans? - There are news stories reporting on how subprime home loans put families in financial jeopardy and are the cause for most foreclosures. Are sub prime mortgages such bad loan programs that one should avoid at all costs?

Subprime Mortgages are designed to help home buyers who do not qualify for conforming loan products. Sub-prime home loans help many people with poor credit history purchase homes, many requiring little to no down payments.

Sub-prime mortgage is a wonderful tool in helping to put people with blemished credit in their dream homes which they otherwise would not be able to acquire, because neighborhood retail banks would likely turn their loan applications down, due to their less than perfect credit history.

In addition to making them homeowners, having a subprime mortgage can also help rebuild their credit profiles, provided they remit mortgage payments punctually, as mortgage payment history weighs heavily on credit scores.

The term "subprime mortgage" has developed a negative connotation primarily due to heavy media coverage of the Wall Street companies who have invested heavily in the mortgage sector and the money they are losing for being overzealous in their investments. Don't let corporate greed and the media frenzy put a label on you.

If your credit is less than perfect, but you can afford to purchase a home, the forgiving and flexible guidelines currently available in the mortgage industry offer you an opportunity to begin building equity in your own home instead of wasting your heard earned money on rent. But don't let that opportunity become a liability by biting off more than you can chew. Don't bend to the pressure of buying as much house as you can afford. Think conservatively about how much you can comfortably afford even if times get tough, plan to make a downpayment, and save as much money as possible prior to purchasing the home. Improving your credit prior to purchasing a home can also help you escape the "subprime" label entirely, and may be the best investment you can make in your financial future.

Subprime Mortgage has a negative connotation because "sub" means "under" while "prime" means "greatest." However, subprime is a very broad term used regularly within the mortgage industry to categorize loan risk. Mortgage loans are typically classified as A, ALT-A, and SUBPRIME. "A" loans carry the least amount of risk while "SUBPRIME" carries the highest amount of risk.

Subprime mortgages are where a mortgage broker really shines. Your mortgage broker will have access to many more programs than your local bank. In most cases, a bank simply will not be able to approve a mortgage application for a buyer who has various special needs, including bad credit, no assets, no rent history, spotty job history. A mortgage broker, however, helps these types of customers find attractive mortgage loans every day.

Sub prime loans gave many people the opportunity for home ownership, and many people have financially prospered from having a sub prime loan. The loans themselves did not cause the problems we are seeing today. The real problems lie in the real estate market themselves and depreciating home values.

Subprime mortgages can be looked at as a "band aid" loan. If your credit isn't in the best shape because you are having trouble swinging your monthly payments on time, consider consolidating some of your debt to lower your monthly payments. Your Mortgage Consultant can show you the best band aid loan for you so you can make all of your payments on time and refinance into a conforming loan once your credit is repaired.

Subprime loans, if used properly, are an excellent vehicle for a consumer to improve their financial position immediately. Many former subprime borrowers have improved their credit rating and have since moved into the "prime borrower" pool. This is often accomplished by using subprime financing as a means to solve ones immediate financial needs.