Sub Prime Mortgages- The Disadvantages

Category: Finance.

Sometimes bad things happen to good people.

Even though there have been major changes in the lending market, it s still possible to get a loan regardless of your credit situation. Even if you re currently stigmatized by bad credit, it doesn t mean you can t get a home mortgage refinance. If you have a credit score under 620, you re probably looking at dealing with the sub prime market. However, sub prime loans still do exist just not as easy to qualify for as they were even six months to a year ago. The sub prime market has been rocked in 2007 with tons of news of lenders going out of business or scaling back their lending operations significantly. Sub Prime Mortgages- The Disadvantages. There is a cost to everything in life, and sub prime loans have some gotchas that you should be aware of.

Getting a sub prime loan isn t without it s disadvantages. A main problem with sub prime loans is that many of them are adjustable, with higher rates of interest. Part of the sub prime debacle of 2007 has been these adjustable rate mortgages. So, you could get in with a decent interest rate, just half a percent or so above normal prime rates, but find yourself in six months with a rate 3- 4% above what you would pay with good credit. After a few adjustments in the rate, many homeowners are faced with payments hundreds and hundreds of dollars above what they originally paid. Prepayment penalties are one of the other disadvantages of sub prime mortgages. These homeowners increasingly find it difficult to keep their mortgages current.

You ll find that many sub prime mortgages have a prepayment penalty. These disadvantages of sub prime loans are serious, so you might want to consider trying to qualify for an FHA mortgage. Which means that if you sell your home or refinance within the prepayment penalty period, you are stuck paying a large fee, up to 4% of the value of your mortgage. This is a popular choice for borrowers with credit problems. Many lenders have been moving more towards FHA mortgages, as there are some interesting proposals currently being discussed in Congress specifically to make these mortgages more affordable and easier to qualify for. It offers an affordable mortgage without the disadvantages of typical sub prime mortgages. Ultimately the best choice would be to work on your credit and get your credit score above 620 so that you can qualify for a prime mortgage, and not be faced with such difficult decisions.

Read more...

What Is Loan Insurance - Annette Mckennon's Finance blog:

When you take out a loan, it is likely that you will be offered loan insurance to protect your payments should you be unable to keep up with them due to illness or unemployment.

Here Are Some Tips On How And Why You Should Use Credit Cards On Your Web Site - Callie Giannone about Finance:

If you have a web site that you use for business, then you should think about setting up your site to allow people to pay for things using a credit card.

This Means That You Could Potentially Waste Time And Effort Applying For Unsecured Loans For Tenants And Tenant Loans To Lenders That May Not Be Able To Help - Eliza Roosa about Finance:

Unsecured loans for tenants and tenant loans are comparatively common in today s busy credit marketplace and to accommodate the demand, there are many more opportunities to place your loan application than in the past.