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Archive for the ‘Subprime Mortgages’ Category

With so much talk about subprime mortgage fallout, it’s important to understand what this could mean to anyone who either owns a home or is thinking about buying or selling. For those unaware of what subprime mortgage means, it is a mortgage granted to a borrower with less than perfect credit. In general, subprime borrowers have either missed payments on a debt or have been late with payments. When this happens, lenders charge a higher interest rate to make up for any potential losses from customers who may either run into trouble or default. In other words, because the borrower is sub prime, lenders will charge a greater interest rate to make up for the possibility of default on the loan. In contrast, “prime” borrowers are those whose credit rating is generally above 620 on the FICO scale. The people who don’t rate high on the FICO score are considered subprime. In that case, their mortgage rates are anywhere from 2 to 5 % higher than those paying prime rates.

Who is Affected By Sub Prime Fallout?

Subprime loans made up 25 percent of the national mortgage market in the last three years. Those primarily affected by the subprime fallout are those people who have applications with subprime lenders that have closed their doors. As homeowners defaulted, subprime lenders that had promised investors they would buy back troubled loans cannot honor those obligations, which is why they’ve started shutting down. With no lender, the homebuyers are unable to close on homes that they’ve contracted to purchase, leaving lots of people in the fallout category.

Affects of Foreclosure

A recent study indicates that approximately one in five subprime mortgages will go into foreclosure. Unfortunately, if the foreclosure is in your neighborhood, it will impact on the value of property for everyone living nearby and even those outside of the neighborhood. As a result, sellers are becoming very competitive since there are more houses on the market, plus prices have started to come down in some areas. If you’re considering buying a home, you may be able to buy your dream home for a lot less than anticipated. But you must have good credit. If you’re credit isn’t good, you may have a hard time qualifying for a loan.

If You Are Selling Your Home

Because subprime lenders made loans to people with poor credit, they made too many loans to those who couldn’t make monthly payments. Now that lenders are tightening their standards, there are fewer borrowers who can qualify for a mortgage, which means less people will have the money to buy a home. So, if you’re in the market to sell your home, you have to sell it at the right price. You may also have to be a bit more aggressive about selling your house by making improvements that make the house more attractive such as making sure your yard is pleasing to look at and the outside has a fresh coat of paint.

Getting a New Mortgage

Because of all the commotion in the sub prime market, it’s critically important to find a mortgage lender that you trust. With good credit, you’ll find that you’re in fine shape and rates will be in your favor. In fact, right now, there’s a high demand for homeowners that can make their monthly payments, so when shopping for a mortgage, get at least three rate quotes from banks and credit unions. Instead of just shopping for a lender, ask friends or associates to make a recommendation. But, remember, if it sounds too good to be true, it probably is. Getting very low rates with no money down isn’t happening in today’s market.

What Mortgage Specialists Claim

Due to the sub prime fallout, mortgage specialists predict that there will probably be a flood of people trying to get mini-refinancing. However, many homeowners will probably find that they can’t borrow as much as they want, mostly because lenders have changed the lending criteria. In other cases homeowners won’t get as high a loan because property values have dropped. And in some instances, those with subprime mortgages won’t be able to refinance because they don’t meet the minimum criterion. What this all means is that your credit score is going to play a very important role when it comes to applying for a home loan. In fact, a lender will carefully review your payment history when deciding whether or not to approve your application for a loan. If the lender sees a poor credit history, in all likelihood, that translates either into no loan or a larger down payment and higher interest rates on loans.

Not a day seems to go by without some sort of news about the subprime melt down. If it isn’t a lender going out of business, its borrowers in foreclosure and everywhere you turn someone is pointing the finger.

This was not always the case. Just over 6 months ago everyone was happy. Everyone loved everybody else. Congress, the senate, the president, were all happy that the housing market was booming and was helping to keep the economy strong. You didn’t hear them saying anything about bad mortgages.

Then you had Wall Street. The big investors, brokerage houses and hedge funds were all fighting each other to get more and more of the high yield mortgage backed securities. They weren’t saying “these loans are dangerous and too risky” They were falling all over themselves and couldn’t get enough.

The lenders were loosening guidelines, to allow more and more borrowers the ability to finance a home. Everyone knew it but no one said a word. The lenders couldn’t close fast enough to satisfy Wall Street hunger for their mortgage pools. They never said that they were worried about the loans going into default or that they may have to buy the loans back.

What about the mortgage brokers and the real estate agents? They couldn’t sell these loans fast enough. Buyers and borrowers would do anything it took and take any loan they could get regardless of the terms, just to get into the house. If a realtor or mortgage broker said “hey you can’t afford this” they would just go to someone else who would get them a loan anyway.

Then the real estate market started to cool. Houses weren’t selling so fast, values were dropping and the first wave of mortgages started to default. Finally the house of cards that was the real estate market started to crumble. New Century the second largest subprime lender went out of business and that was the beginning of the end.

Sub prime lenders started closing up shop left and right. Big Wall Street banks started to make lenders buy back loans. Hedge funds started to lose money. It all unraveled quickly and painfully and there is still more to come. Now everyone is pointing the finger.

All the politicians are screaming “Where was the oversight?” Wall Street is yelling “These lenders were out of control loosening up guidelines like that.” The lenders are saying ‘Those darn brokers took advantage of us.” Brokers are saying to the lenders “You’re the ones that loosened the guidelines.” Realtors and the buyers/borrowers are pointing at everyone saying “How could you all do this to us.”

Everyone is trying to point the blame at anyone they can find to push the blame somewhere, anywhere but at themselves. So who’s to blame for the subprime meltdown, I think it’s pretty obvious, everyone is!

Even with a Chapter 7 bankruptcy in your credit report you can still qualify for a sub-prime mortgage. Once approved, you can then use your mortgage to improve your credit history, qualifying you for lower interest rates in the future.

The Effects of a Bankruptcy

A bankruptcy will affect your credit score based on how long ago it was. So a bankruptcy discharged less than a year ago will qualify you for a D loan. These types of loans usually require 30% down and a high interest rate.

By waiting a year after a bankruptcy, you can qualify for a B or C loan with their lower rates and down payment requirements. If you wait two years, you can qualify for a FHA home loan. In four years, you can qualify for a conventional loan.

Besides your bankruptcy record, financing companies will want to see a steady payment history. This includes your credit and rent payments. Cash reserves for six to twelve months will also offset your credit risk.

Search For Lenders

Not all sub-prime lenders evaluate borrowers the same way. So you may qualify for a B loan with one lender and a C lender with another. To find who will offer you the best financing, you will need to request quotes from several lenders.

You can request quotes over the phone or online. Online sites will provide a fairly accurate quote based on the generic information you provide. You can also use free mortgage broker sites which provide home loan quotes from several different financing companies.

Before You Apply

Before you apply for your mortgage, make sure that all accounts involved in your bankruptcy have been closed. You can request a copy of your credit report from the reporting agencies to check your information. You may also consider including a letter in your report explaining the circumstances of your bankruptcy. Some lenders will look more favorably on your account if illness or job loss affected your finances.

After Your Mortgage

Once you have purchased your home, plan on rebuilding your credit history by making regular payments. Within two years you may qualify for a conventional mortgage with low rates.

To view our list of recommended subprime mortgage lenders online, visit this
page: Recommended Subprime
Mortgage Lenders Online.

Taking into consideration the latest turn over of the housing market there are many consumers that have been left without a home. This is not need to happen to all consumers because with a little assistance and subprime mortgage aid this situation could be avoided. Obviously, it is not easy to get rid of a stressful mortgage, but now there being designed around the country some subprime mortgage assistance programs to help homeowners. There are many such programs which offers assistance especially in the United States. You need to make your own judgment when it comes to dealing such matters.

Finding subprime mortgage assistance is frequently as easy as calling your lender. Due to the costs that are involved when being in foreclosure, your lender will certainly agree to help and avoid this process. If you do not want to get in touch with them they are not able to provide borrowers the needed help for subprime mortgage holders. However, if you decide and contact a representative of your lender they should help you and get you in contact with specialized agencies who can deal with your type of loan. Another option is the lender possibility to offer you his own subprime mortgage assistance program.

There are some consumers which look for help in their local governments, but the programs offered are rare. Because many areas do not have necessary amount of money to solve the problems of all borrowers it is hard to believe that some really sustain these programs. Although the federal government is trying to create some programs to solve the problems with subprime mortgage, because of the government necessities their help is often delivered to late. For this reason, for many consumers there are not many options left.

Therefore, the best solution to find help when dealing with a subprime mortgage is to get in touch with your lender who is taking care of your mortgage. Plus, it is in their benefit that the payments stay firm, and often they are interested in making arrangements and to help you. But if you find yourself trapped in huge problems but still wanting to preserve your home, you could get assistance from your lender as a temporary deferment, or you could divide your missed payments in small amounts and add them in the fallowing payments.

It is important to start and look for help no matter the sort of subprime mortgage you have. This requires some phones to make and to sacrifice some of your time, but in this way you can find the best subprime mortgage assistance programs and which are specially designed for specific features you need . There may be some who have requirements as length in loan, the loan amount, the interest rate paid, that have to be met so that they could give you the help needed. The most important objective is to preserve your home safe and, that is why a little bit of your time in deciding how to get the appropriate subprime mortgage assistance it is worth the trouble.

If you have bad credit history, no down payment or difficult to prove income and are looking to get approved for a home mortgage loan, you will probably need to look at subprime mortgage lenders to help you. To see a list of our recommended subprime mortgage lenders you can click on the link below.

There are a few things to know about subprime mortgages lenders. They specialize in providing mortgage loans for people with less than ideal situations, whether it be difficult to prove income, low or poor credit scores (most often the case with subprime mortgages), or no down payment (this factor alone will not necessarily put you in the subprime loan category).

The interest rate on a subprime mortgage loans will be higher than any other type of mortgage loan where credit, income and down payment are all optimal. However, with subprime mortgage loans, as a borrower, you need to be careful about a few things when dealing with subprime mortgage lenders.

The interest rate with subprime mortgages can vary greatly. There are some subprime mortgage lenders that, for the same set of qualifications, can offer an interest rate of say, 7%, which is a little above average, and then there will be others who will quote 9-12% or more. Now, if this is all for the same qualifications, you could be talking about hundreds of dollars a month extra in payments just because you are not getting a fair interest rate for your qualification. This is where the borrower needs to be careful. Make sure you are getting the best interest rate possible with your subprime lender. Some subprime lenders take advantage of borrowers with bad credit or hard to approve situations, and they charge much more in interest than what is fair for to the borrower.

Another way subprime mortgage lenders can take advantage of unsuspecting borrowers is by the lender having a pre-payment penalty on the loan that is unreasonable and not fair to the borrower, based on their qualifications. A typical subprime mortgage loan will have a 6 month to a 2 year pre-payment penalty. However, sometimes a subprime lender will offer a loan with a 3 year or higher pre-payment penalty. That is too high, I think a 2 year pre-payment penalty is high, but any higher than that, and you should probably keep looking for a new lender.

Other than a couple of things to be careful of when dealing with subprime lenders, getting approved, even with a slightly higher interest rate, can be a really great thing for you to buy the home you want.

To see our list of recommended subprime mortgage lenders, visit this page: Recommended
Subprime Mortgage Lenders

There are more than 19,000 mortgage companies in the U.S. and some of the largest and most reputable of them specialize in subprime mortgage refinancing.

Steven Frank, Senior Vice President of Marketing at FlexPoint Funding identifies a subprime borrower as “someone with a FICO score below 620. He or she will pay between 1.5% and 2% higher interest for a mortgage, but there is no shortage of money or willing lenders in the subprime mortgage market.”

What trends do you see in the subprime mortgage market for 2006 and beyond?

Steve: We went through the biggest refinancing boom in history from mid 2002 through September of 2005. As many as 80% of Americans refinanced their homes during that time. Interest rates on adjustable rate loans dropped to under 4% during the boom with some homeowners opting for fixed rates as low as 5%.

Now both fixed and adjustable are back around 6.5% and will probably reach 7% for an A-grade 30-year fixed mortgage and 9% for a subprime mortgage by the end of 2006. The rate of appreciation is a more normal 6% – 12% annually. A typical home in most parts of the country stays on the market about six months, which means it’s a balanced market favoring neither buyers nor sellers.

What type of mortgage would you recommend for subprime borrowers?

Steve: Most subprime borrowers won’t qualify for a second mortgage or a home equity line of credit. They will have to refinance their first mortgage if they want to cash out some of their equity. Depending on their personal situation, a homeowner may be able to borrow up to 95% LTV (loan to value). More likely, it will be in the 75%-85% range. There are very few 125% LTV mortgages anymore, and subprime borrowers won’t qualify for these.

Subprime borrowers should work with a company that understands their particular needs; one that sees more than their past problems and that specializes in flexible, affordable mortgage solutions.

Mortgage Refinancing Advice

Check your credit – According to the government loan agency, Freddie Mac, up to 15% of subprime borrowers have credit scores that qualify them for traditional loans. Don’t settle for subprime rates if you can get prime-rate mortgage refinancing.

Watch your costs – Interest rates won’t vary much among subprime mortgages, however, there are some aspects of the loan structure that will impact the bottom line, such as:

- length of the mortgage term; 10, 15 or 30 years

- if it is a fixed-rate loan or an adjustable-rate loan

- whether any points have to be paid ( a “point” equals one percent of the loan)

- what kind of processing fees and closing costs are required

Look for good customer service – A good lender will walk potential borrowers through the application process, verifying personal information and making sure all the terms of the loan are understood. The lender will also recommend whether to lock in an interest rate during the processing phase or let the rate float until the closing.

Get a free quote – Prospective borrowers looking for refinancing can take advantage of sites like Bad Credit Mortgage Refinancing Now [http://www.badcreditmortgagerefinancingnow.com].