Subprime Mortgage Lenders

Subprime mortgage lenders are getting the flak. There is no end to the vilification heaped on subprime mortgage lenders; after all, they are party to the woes of subprime mortgage borrowers who have lost their homes. But thanks to them, borrowers with bad credit can own homes, albeit the harder way.

Subprime Lenders, What are They?

When you can’t get a loan from the bank, you go to the neighborhood sharker. The same happens when borrowers with low credit scores can’t get a mortgage from the bank. The option is borrowing from a subprime mortgage lender. Like the neighborhood sharker, subprime mortgage lenders will squeeze the last drop of blood from the hapless borrower even before the inked signature dries.

Subprime does not mean you are getting a lower rate than those given to prime mortgage. The reverse is true. Prime rates refer to lower interest rates given to borrowers with good credit ratings; borrowers with less than perfect credit score are punished with hiked rates. This is to clarify the confusion about the term subprime.

Are there Credible Subprime Mortgage Lenders?

Yes, there are. Some mortgage banks offer both types of mortgages. If you don’t qualify for a prime mortgage, they’ll offer you a subprime. With this bank, you are sure you’re dealing with a credible lender. Some banks have affiliated subprime mortgage banks while there are those, which own subprime mortgage banks sporting different names.

There is reason to be suspicious of subprime mortgage lenders. Many of these just want your assets so watch out for spurious lenders who won’t hesitate to fleece you the moment you walk into their office. This explains why these lenders are hated by middle-class borrowers.

What to Watch Out For

Predatory subprime mortgage lenders are aplenty. These tips will alert you to them:

Upfront fees – when a lender asks for an application fee that is worth a dinner at the Ritz, get out fast.

Excessively higher rates – it is right to expect higher rates but if these should not be five percent above the prime rate.

Backdoor rates – these are additional fees that are not initially discussed. You get the shock of your life if you are going to pay more fees during the closing or after the closing of the mortgage. Ask about this upfront and tell them you are not paying for something that is not in the checklist and let them put it into writing. If they don’t, shop for another lender.

Don’t give in to pressures to finalize the mortgage and if you don’t understand the workings of the loan being offered to you, bid them a good day. Finance experts advice that if you can wait, repair that credit score first rather than go to subprime lenders, like a lamb to the slaughter. Get an experienced licensed broker who knows the ins and outs of subprime mortgage and while you focus on other concerns. The broker will assess your financial situation and discuss the possibilities of specific mortgage types that will be ideal for you.