gnmike87 asked:


I live in oklahoma. Why is a 691 still considered sub-prime? I thought the cut-off was 680ish. Will I be able to get a decent home loan with this credit rating?

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Court Tuttle asked:


A sub-prime loan lender is a lender who lends money to borrowers who do not qualify for loans from mainstream lenders. Often these lenders are independent, and yet more are affiliate with prime lenders operating under different names.

The only clear giveaway are their prices, which are higher than those quoted by mainstream lenders. It is definitely to your advantage if you quality to go with a prime lender no matter what a sub-prime lender might tell you.

Sub-prime lenders base the rates higher the lower your credit scores are and the smaller the down payment is. The entire structure of rates and fees is higher to cover the risk of sub-prime lending.

If you fail to qualify for prime financing due to low credit scores you should then consider a sub-prime loan. A very low score will certainly disqualify you. A middle score might or might not, depending on the down payment, plus your income and assets.

The purpose of the loan and the property type could make the difference. For example, if the borrower is weak in some factors he could make it if he was purchasing a one-bedroom home, but if he were purchasing a four-bedroom home he would not qualify.

And other type of borrower for this type of loan is someone with poor credit scores. They apply for an adjustable rate mortgage on which the rate is fixed for two years, and then rises sharply. The trick is to refinance before the two-year mark.

The major threat to such a plan is a prepayment penalty that runs past two years and a lender fails to report their payment history to the credit agencies. Borrowers should be on their guard against both.

The development of the sub-prime market has made mortgages and home ownership available to a segment of the population that otherwise would have been shut out of the market. That’s good news.

The bad news is that some borrowers who are eligible for loans from the prime lenders can end up in the sub-prime market and pay sub-prime prices.

Sub-prime lenders market aggressively to homeowners who already have mortgages. A major pitch is the cash the borrowers can take out of their properties through a cash-out refinance.

Also, lower payments are possible on interest-only mortgages and the option ARMs that are a gamble, which usually end up in a heavy loss. A higher percentage of sub-prime loans than of prime loans go into default.

Sub-prime lending costs are also higher because more applications are rejected and marketing costs are higher.

The best advice is to keep your credit score high, save for a deceit down payment, have little or no bills and go with a responsible prime or mainstream lender with a good reputation.



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ichabodisitchy asked:


We are thinking about getting a home equity loan. We need a new roof and our AC unit is making our electric bill sky-high.

We’ve never had a home equity loan before, and I’m just wondering if we should go with the company that holds our mortgage, a different company, or does it matter?

Any tips would be helpful as we’ve never done this before.

smiling_chicka asked:


My credit isn’t perfect and I want to get a home equity loan. What are the qualifications? What lenders look at if you have bad credit? How can i increase the chances of getting one, without waiting for credit to go up?

Would appreciate if you can answers even one question. I am desparate for good information. Thanks!

Lesley Lyon asked:


A personal loan with an interest rate that is above the prime rate is known as sub prime personal loan, the interest rate being 0.1 to 0.6 percentages higher than the standard interest rate. This is so because since the sub prime borrowers are considered to be risky the lenders try to make up for the risk by charging higher interest rate. To decide whether this is a good financial move, the borrower should look at his current credit and financial situations.

The most common of all sub prime personal loans is the home loan. Home loans are designed for people with credit problems to purchase a home. Lending institutions, which are reputed countrywide, offer such loans. There are precautions to be taken because several scam artists and exorbitant fees are there on the Internet.

Since there is no standard rate charged by sub prime lenders, they treat each case individually and often charge high interest rates. But it is always better to do a thorough research because some sub prime lenders may even offer loan packages that are manageable. Sub prime lenders often look at the credit report of the borrower, employment history, income and the amount of debt if any and so on.

The cash that is available makes all the difference. If the credit rating is low, the borrower should have a much more cash available to compensate, which could lead to higher down payment sometimes as high as 20 to 25 percent. If not, there is no other option but to go in for bad credit personal loan.

As sub prime lenders may offer a mortgage with alarming terms hidden in the blue print, so thorough investigation is essential. Some sub prime lenders offer credit cards to financially distressed people. Counseling with credit counselors or with people who have had experience in the field can be of some guidance.

Most people applying for sub prime personal loans have a credit score less than 620.The borrower is eligible for a prime rate loan if the credit score is more than 620. At times, banks may refer to individuals to a finance company or affiliate for sub prime lending. It is sane to check whether the company is federally insured or search the Internet for customer reviews regarding various lenders and ascertain that the payments are manageable so that the debt is not compounded.

Sub prime loans should be taken only if it is an utter necessity because borrowers have to pay a sizeable amount of interest over the life of the loan. Sometimes sub prime lenders who can be termed as predatory may use certain techniques to make the borrowers a prey to them. They may sell properties more than their worth by false appraisals, encourage borrowers to lie about their income, and expenses, pressurize borrowers to accept higher-risk loans, target vulnerable borrowers to cash out refinances or use high pressure sales tactics to sell home improvements etc. Borrowers should do complete research to avoid being victimized by such predatory lenders. There are even laws to protect the borrowers who have fallen a prey to such lenders which can be availed of.



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cmsb705 asked:


A home loan with less than 20% down requires PMI (Private Mortgage Insurance). Since most “sub-prime” mortgages would require PMI, why are banks losing so much money on these loans? Shouldn’t it be the insurance companies that lose the money?

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draggamo asked:


Is Lehman Brothers the issuer of the mortgage-backed securities or the investor of the mortgage-backed securities? And who is the originator of these mortgage loans? Is it Fannie Mae and the like?

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Michael Marchese asked:


A sub-prime mortgage is a mortgage that is extended to people who are not qualified to get the normal mortgage. Most of these mortgages are offered by the same companies that offer the mainstream mortgage but in a different lending institution. The rates for sub-prime mortgages are higher than the rates for prime mortgages thus; it is advisable to get a prime mortgage if possible. The main reason that makes one fail the qualification of prime mortgages is the credit rating where one gets a low credit score and they are rejected by the prime mortgage lender based on the assumption that the person is not able to service the prime mortgage.

The terms that are given for sub-prime mortgages include a small down payment and higher payment due to the higher interest rates and a longer payment period. The rates of sub-prime mortgages are raised to cover the risk that come with offering mortgages to people with low credit scores. There are chances that they might pay late or they might fail to pay if they do not have enough money to service the installment. The high mortgage rates are also meant to discourage borrowing of the sub-prime mortgage and this idea works since a majority of people accumulate their savings and get the prime mortgages.

The advantage of these mortgages is that they allow those people who have low credit ratings get the services that are usually accessed only by the people with high credit ratings. An additional advantage is that they have a longer repayment period and thus they are well suited for customers who would like to extend their repayment period. The disadvantage of these types of mortgages is that some of the people who qualify for mortgages are referred for sub-prime mortgages when their credit rating is low. The lending company determines one’s credit rating and whether one should be issued with a prime or sub-prime mortgage. This thus, leads to people who would otherwise have qualified for a prime mortgage being relegated into the sub-prime mortgage area. Additionally, this thus makes a person get one of these mortgages when mortgage lenders solicit them. They do not get a chance to consult prime mortgage lenders. Therefore, once these sub-prime lenders get solicitation commissions, they then carry out a process called ’steering’.

The houses for which sub-prime mortgages are offered are not in good condition as those that qualify for prime mortgages. This arises from the assumption that when one has poor credit rating, they are not well up and thus they do not need a very expensive house. Sub-prime mortgage also face competition from prime mortgage lenders since the mortgage lenders offer lower interest rates. These lenders also offer customized mortgage programs. Most people who fall in the middle class or are associated with this financial status subscribe to sub-prime mortgage since when they apply for these mortgages they qualify. Most citizens cower from the mainstream mortgage, which they assume is for the wealthy. For this reason, people are advised to consult with the relevant people prior to taking up a sub-prime mortgage.



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Albert Alexander asked:


Home equity loans are sometimes used for consolidating consumer debt or covering a large expense such as a wedding, college expenses, or home repairs to your existing home. Home equity loans are great in that they use the collateral already invested in your home to secure the loan, allowing you to get a better rate out of the deal and make smaller payments than you would to a credit card or even on a personal loan. Home equity loans are desirable to borrowers because they oftentimes have a lower interest rate, they are easier to qualify for even if you have bad credit and your monthly payments on a home equity loan may be tax deductible.

In the past, home equity loans were more often than not used for home upgrades that would raise the value of your home. Nevertheless, these loans have become a feasible option for large, non-home improvement related purchases or even for consolidating outstanding debts into one monthly payment at an affordable interest rate. Even as home equity loans are a great means to release extra cash which is tied up in your home, borrowers must be fully aware that they are using their home as collateral. If a situation arises and their loan requirements aren’t met, they could lose their house.

Lenders consider several factors such as your credit history, ability to repay the loan, and your homes equity (noted above) when deciding how much money to lend. Although the chances of your approving for an equity loan may increase, you’re not going to get a complete pass on the “process”. Lenders will still have to review the credit history of potential borrowers to settle on their credit worthiness. Lenders will still have to review the credit history of potential borrowers to settle on their credit worthiness. Lenders will still have to review the credit history of potential borrowers to settle on their credit worthiness.

So how much can you get? The amount of your loan is tied to the equity in your home with is simply determined by subtracting the amount owed on the home from the current market value. Equity loans enable homeowners to borrow money against their home’s calculated value. The “equity” merely refers to the cash value that has grown in your house because you have been making your monthly payments over time.

Equity loans, secured by real estate, are normally deemed safer by lenders. Because of this your interest rates are likely lower than credit card rates or even consumer loans. Additionally, regardless of the rate, the interest on debt secured by the mortgage or lien on your personal residence is commonly tax-deductible. Please consult your accountant for more detailed information. Home equity loans are, essentially, fixed rate home loans that enable you to take advantage of the money you’ve already invested in your home to finance larger debts at a lower interest rate than most revolving credit options. Home equity lending, often referred to as a second mortgage or borrowing against your existing home, can open up a lot of avenues as a funding source for a current homeowner..

When all is said and done, home equity loans are a great option if you are confident in your ability to pay them off. Because they normally have a lower interest rate, are less difficult to qualify for (even with poor credit) and the interest may be tax deductible, home equity loans are a great alternative for homeowners. Like anything else however, buyer beware. Less reputable lenders frequently target people in vulnerable circumstances with troubled credit by suggesting what appears to be an easy solution. Hidden fees and confusing rate calculations can make a bad situation get worse.

Louis G asked:


sub-prime lenders give loans to people with bad credit. It’s a small segment of the market. The news is coming out that people are defaulting on these loans.. Why is this suprising? it’s a sub prime market. Of course risky loans to people with bad credit are going to be defaulted on. The market is plummeting on this news as if it is a suprise somehow.
What gives?

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