A Texas home buyer looking for a great deal on a subprime mortgage Houston lenders have on offer must first do a lot of preparation to facilitate fast approval. It's not so easy now, because it is an excess of these very subprime mortgages that triggered the real estate crash that eventually lead to a global recession. Safeguards have since been put in place to prevent abuse by lenders. Practically speaking, this means that borrowers have to fulfill a lot more requirements.
This only applies to people with credit scores below 620 who do not qualify for traditional fixed-rate home loans. Their credit history will likely include missed or delayed payments, and maybe even a prior foreclosure. In such cases, lenders will take the additional risk only if they can get higher interest from the borrower through a variable rate proposal.
After an initial period where the interest rate is set low, customers start paying higher interest pegged to an index and typically updated each year. Prior to the market crash, these loans were easily available with low down payments and very little in the form of supporting documents. This resulted in a flood of subprime mortgages being approved that are now underwater.
Many of these home owners no longer have enough income to meet the monthly payments, but even foreclosure will not be enough to clear the amount due. As a result, no lender will now approve a risky proposal without clear proof of sufficient income and big down payments. Most lenders will ask the borrower to come up with anywhere from 20-40 percent of the property value.
One good thing is that there are no penalties for prepayment. The whole concept is based on an assumption that the borrower's credit will improve soon and allow for faster repayment. The same holds true for refinancing to convert the proposal into a low-interest mortgage with relatively smaller monthly payments.
The trickiest part is getting in touch with the right lender. Since these practices have gotten so much negative publicity, lenders no longer advertise their subprime lending business. Home buyers have to contact a lot of lenders, and hope that one of them can do it or refer the customer to a sister concern or affiliated company.
Before talking to anyone, put together a file that contains all the required documentation. Include the latest income tax return, the two latest pay slips, and an updated bank statement. A letter from the borrower's employer needs to be included, stating that the applicant is currently employed and in good standing.
It's also a good idea to put together a file that shows all the recent bills that have been paid off by the applicant. For instance, proof that credit card bills, car loan payments, etc. Are being met shows that the borrower is a fiscally responsible person, and the negative mentions in the credit history were part of a phase that is now in the past. This is the only way to get the best possible deal on a subprime mortgage Houston lenders may offer for home buyers with a bad credit history.
This only applies to people with credit scores below 620 who do not qualify for traditional fixed-rate home loans. Their credit history will likely include missed or delayed payments, and maybe even a prior foreclosure. In such cases, lenders will take the additional risk only if they can get higher interest from the borrower through a variable rate proposal.
After an initial period where the interest rate is set low, customers start paying higher interest pegged to an index and typically updated each year. Prior to the market crash, these loans were easily available with low down payments and very little in the form of supporting documents. This resulted in a flood of subprime mortgages being approved that are now underwater.
Many of these home owners no longer have enough income to meet the monthly payments, but even foreclosure will not be enough to clear the amount due. As a result, no lender will now approve a risky proposal without clear proof of sufficient income and big down payments. Most lenders will ask the borrower to come up with anywhere from 20-40 percent of the property value.
One good thing is that there are no penalties for prepayment. The whole concept is based on an assumption that the borrower's credit will improve soon and allow for faster repayment. The same holds true for refinancing to convert the proposal into a low-interest mortgage with relatively smaller monthly payments.
The trickiest part is getting in touch with the right lender. Since these practices have gotten so much negative publicity, lenders no longer advertise their subprime lending business. Home buyers have to contact a lot of lenders, and hope that one of them can do it or refer the customer to a sister concern or affiliated company.
Before talking to anyone, put together a file that contains all the required documentation. Include the latest income tax return, the two latest pay slips, and an updated bank statement. A letter from the borrower's employer needs to be included, stating that the applicant is currently employed and in good standing.
It's also a good idea to put together a file that shows all the recent bills that have been paid off by the applicant. For instance, proof that credit card bills, car loan payments, etc. Are being met shows that the borrower is a fiscally responsible person, and the negative mentions in the credit history were part of a phase that is now in the past. This is the only way to get the best possible deal on a subprime mortgage Houston lenders may offer for home buyers with a bad credit history.
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