Subprime Mortgage

Subprime mortgages are home loans offered to people who have low credit scores. Scores range from 300 to 900 points. A subprime mortgage is for people who have a credit score of 620 or below. These usually carry much higher interest rates and may have higher closing costs, balloon payments or prepayment penalties. This type of home loan can be a really good thing is the consumer has less than perfect credit, but it is important to make sure the individual is aware of all the costs before signing the contract.

Before considering this agreement, there are a few things the consumer should research. The first thing the individual must know is what their financial history and current rating. Some subprime mortgage lenders will lie to the consumer about these numbers to make them believe they are much worse off than they truly are. The consumer can find this information on their own by seeking it from one of the three main credit reporting agencies. Lending companies will look at the type of delinquencies the individual has as well. Delinquencies on credit cards are considered minor compared to late payments on past loans or rent. The person must clear up any errors on their credit report as well. Correcting mistakes may make it possible to raise the score making the need for subprime mortgages unnecessary.

Any consumer contemplating this type of home loan program should complete a great deal of comparison shopping before making an agreement with any lender. With a conventional mortgage, lenders basically charge the same interest rates and fees. With subprime mortgages, fees and interest rates can very greatly. By seeking quotes and information from a variety of sources, the consumer will have much more insight into this loan program. This also provides the opportunity to ask the subprime mortgage lender what factors they base their loans on. It is important for the consumer to realize that they will not have to select the first offer. If one company is willing to offer a loan, many more companies will do the same. With many offers, a person can review the rates and terms, in order to choose the program that fits their personal needs. The individual needs to take control of their financial situation through research, comparison, and gaining as much knowledge as possible about the subject. "If any of you lack wisdom, let him ask of God, that giveth to all men liberally, and upbraideth not; and it shall be given him" (James 1:5).

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