Is A Subprime Mortgage Your Only Choice For A Home Loan?

These Loans No Longer Exist 

A subprime mortgage is normally for borrowers that have credit issues. The credit issues can range from late payments and collections to bankruptcy and foreclosure. 

Subprime mortgage rates can be all over the board. It really all depends on the situation that you are in and especially your credit scores.  Subprime mortgage rates can vary greatly from as little as ½% to 5% above the going 30 year fixed rate.

The beautiful thing about subprime mortgages is that you can buy a home one day after a bankruptcy and foreclosure. And often times with zero down if your credit score is at least 600. You can often times have unlimited late payments, unlimited collections, repossessions, and charge offs.

With a sub-prime mortgage you can have credit scores as low as 560 and still do 100% financing. With a credit score of 560 and 100% financing expect to pay some very high interest rates.

With credit scores of 500 you can still buy a home with as little as 5% down. You will need to get creative to make this happen. You will need the seller to carry back a second mortgage of 15%. By the way you have to work really hard at getting your score to 500. You basically have to pay everything late all the time.

Or have had a recent bankruptcy or foreclosure.

A subprime mortgage is usually offered as a 2/28 or 3/27. Meaning it is fixed for 2 or 3 years and then turns adjustable. If you really want a 30 year fixed mortgage expect to pay a much higher interest rate.

It is extremely important to shop around if you only qualify for a subprime mortgage. The rates can vary dramatically between each subprime mortgage lender. Or simply use a mortgage broker to shop for you.

Another really cool feature that more and more subprime mortgage lenders are offering. Is that they are allowing the seller to pay all of your closing costs. In other words you may be able to buy a home with no or little out of pocket costs. 

Please be prepared to make quite a few offers. Most people do not want to pay a real estate agent 6% to sell their home and then another 5% to pay for all your closing costs. I am not saying that it is impossible, because I see my clients do it all the time. I just know form experience that it is much harder than if you could pay the closing costs your self.