Bad Credit Loans Information

Subprime lending – A type of mortgage lending intended to serve borrowers who do not qualify for prime loans because of credit problems or a limited credit history.There are 100% purchase programs for people who have a 560 credit score. Subprime loans that are over 80% typically don’t require Mortgage Insurance. The risk of default is already calculated in the rate.

Subprime loans are a great tool to get credit challenged borrowers into a home quickly without taking the time to clear up past credit issues. When going into a subprime loan it is often advised to opt for a 2/28 or 3/27 vs a 30 year fixed. A 2/28 or 3/27 loan is fixed for the first 2 to 3 years then becomes an adjustable rate thereafter and offers a lower rate than the 30 year fixed. This 2 to 3 year time period gives you the time to better your situation enabling you to qualify for a conforming loan with lower rates before the rate becomes adjustable.

Whats in a name? A new term making its way in the mortgage industry in response to the term sub-prime. That new term is non-prime. Some lenders believe that calling a loan category “sub” is demeaning and turns off prospective credit challenged borrowers. The term non-prime suggests a less derogatory connotation and may be more viable as a marketing term.

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