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Subprime Lending

How does Subprime mortgage lending differ from the traditional ways of mortgage lending? Subprime loans offer those consumers with low incomes and poor credit histories access to home, credit card, or auto financing. Subprime mortgage loans are also known as “B”, "C” or “D” loans and will normally have very high interest rates and fees opposed to conventional borrowing. The repayment terms often leave the borrower with a large final “balloon” payment which must be paid in full to satisfy the debt. In contrast, a conventional mortgage loan (known as "A" loans) has lower interest rates and fees without the balloon payment.

Regardless of whether you borrow from a sub-prime lender or a good credit lender, your loan may require you to pay points. Sub-prime lenders can often charge more points for a sub-prime loan than other lenders. The amount you pay in points becomes part of the annual percentage rate of the loan you will obtain meaning very costly. This is why we advise for you to improve your credit and consolidate your debt before buying or refinancing that home.

It is very important to shop around for the best deal because there are so many loan choices. You will find that the sub-prime loans and good credit loans offer different prices, terms and conditions. When you are in the market for a mortgage, a good way to shop for the best deal is to surf the internet and find the best lenders like the ones on this website we have listed, listen to radio advertisements, watch TV, or ask a friend or relative you trust who has borrowed from a subprime lender before. Compare the fees, interest rate, points, and the APR. Not just one of them.

If this is a subprime home loan you are applying for then keep in mind that it is using your home as collateral and you can lose that house if you do not make you default on your payments.

Most subprime lenders are legitimate organizations providing access to credit for individuals with
limited incomes or poor credit histories. Unfortunately, some subprime lenders may conduct business in an unfair manner by taking advantage of financially uneducated consumers with unreasonable pricing, terms, and conditions.

Here are some tips on how to protect yourself from unscrupulous sub-prime lenders:

• Never deal with a door-to-door salesperson
• Never respond to telephone marketers for home
  mortgage loans, credit cards, or short-term loans (We advise not to give out any credit information over the phone unless you are making the call to THEM!)
• Ask the lender if you qualify for a less expensive loan before accepting a subprime
  mortgage
• Check your own credit rating to make sure you have all the proof that your credit is damaged do not take their word for it
• Remember that when deals sound too good to be true they tend to be too good to be true!
• You may apply for different loans but do not sign any papers before you shop around and compare other lenders
• Read the details of the loan documents carefully by paying special attention to the interest rate, fees, points, terms and conditions of your loan. If you see a high “APR” ask for the subprime lender to explain
• If you change your mind know your consumer rights and that you have a right to cancel any loan within 3 days.
• Make sure to ask the lender to provide you with a “Notice of Rescission,” also known as a
  “Notice of Right to Cancel.”
• Do not deal with any unlicensed lender
• Do not allow yourself to be pressured into a loan you cannot afford!