What is a Subprime Mortgage?
If you are interested in finding out what a subprime mortgage is then you would do well to read on.
Subprime Mortgage – Explained
If you have recently applied for a mortgage and found yourself on the rejection pile due to bankruptcy or a bad credit history then you may find that a subprime mortgage is for you. A subprime mortgage loan is a mortgage that is specifically designed for people who are denied prime or standard mortgages by traditional or hard money lenders. A subprime mortgage may be suitable for people who have a poor credit rating or have difficulty proving a regular, reliable income. Understanding a subprime mortgage and the benefits which it may offer your situation may aide you in obtaining a mortgage.
Subprime Mortgage – Pros
A subprime mortgage is designed to specifically benefit people who may be having problems obtaining a prime mortgage, either due to a bad credit rating or possible due to bankruptcy. Therefore, one of the main benefits of applying for a subprime mortgage is that it can be much easier to obtain than a standard prime mortgage. The downside to a subprime mortgage may be that overall you may pay a slightly higher interest rate. It is for this reason that you would do well to really shop around for the right interest rate on your subprime mortgage before you sign anything. Also, remember that you can always refinance later at a lower interest rate when your credit score has improved.
Subprime Mortgage – Cons
One of the disadvantages of the subprime mortgage is that it may have a pre-payment penalty on the loan and this is something that you should check before you plan to refinance. Many subprime mortgage loans have this pre-payment penalty, which may mean that you are heavily penalised should you want to pay off the loan or re-finance. This fee may even be as high as 6 months worth of interest. Try to make sure that you can pay off your subprime mortgage in the shortest amount of time possible. You may also want to consider applying with a subprime mortgage company that will provide you with multiple offers in order to ensure that help you be sure you are getting the best interest rate and one of the top subprime mortgage brokers.
One of the major disadvantages that some people have come across in the last decade as regards the subprime mortgage is subprime mortgage lenders who are more than happy to take advantage of the situation which some bad credit borrowers find themselves in. Therefore, if you are interested in obtaining a subprime mortgage, you need to be aware that many lenders will try to take advantage of borrowers with recent bankruptcies and bad credit because they know that the borrower’s loan options are limited.