Get Flexible Loan Terms From Sub Prime Lenders

2007-11-09 05:11:17

( Financial )



While most of the homebuyers that sub prime lenders cater are those who have imperfect credit histories, and low credit scores, there are also other categories of buyers who would only qualify for sub prime mortgages. For instance, you may have an unblemished credit history, but cannot meet the asset documentation and income requirements of prime lenders. In this particular situation, only sub prime lenders would be willing to lend you the money for the purchase of your home.

Sub prime lenders are able to lend money to riskier loans and borrowers because the standards of their underwriting are more flexible than prime lenders. However, you will be charged higher interest rates and closing fees in your sub prime mortgage. Sub prime lenders explain that the reason they charge higher than prime lenders is due to the fact that they incur higher default rates and delinquency among their sub prime loan borrowers.

There are also features in sub prime lending that you cannot often find in prime lending practices. These include negative amortization, balloon payments, and prepayment penalties. According to sub prime lenders, these features help them offset the extra risk associated in sub prime loans. For this reason, you must manage your sub prime mortgage carefully so that you will not be having difficulty in repaying your home mortgage and you will avoid paying the penalty charges for late payments.

Unlike prime lenders, you can get a sub prime loan from sub prime lenders with a small amount of down payment. Sub prime lenders would not also require you to put in escrow the insurance and taxes related to the mortgage property. If you choose an adjustable rate mortgage from sub prime lenders, you can refinance your loan at a better rate. Just make sure to check the terms regarding prepayment penalty.


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