Guide to Sub-Prime Mtg Loans

A subprime mortgage loan is made to a borrower with credit problems who does not qualify for a traditional loan. These loans are relatively new, but are growing in popularity. The subprime lending market is currently under fire for its part in the growing number of foreclosures in the United States.

With so many lenders to choose from online, choosing the right one can seem overwhelming. The convenience of the internet allows you to search for the best rate, compare financing options, and avoid predatory lenders with excessively high rates.

Expect your interest rate to be about 2% higher, with additional fees equaling no more than 2% of your mortgage.

Mortgage lending websites will offer multiple quotes, or if you prefer a particular lender, ask for a quote at their website.

When you are ready to apply, fill out the online application form, where you will provide your name, address and social security number. If you have a property in mind, you'll need to provide the property address and selling price.

If you have requested a loan quote, most of your financial information can be found in databases, so you may not need to fill out any additional forms. The financing company can complete your forms and you will be asked for your approval when they are ready to close.

The mortgage takes about a month to process. The subprime lender verifies your credit and the value of the property. An escrow company can help you with closing costs and points. Don't disclose any personal information to the escrow company until you verify that they are properly licensed. Call the California Department of Corporations toll-fee at 1-866-275-2677 to verify licensing.

There are many benefits to applying online. These benefits include:

Convenience- With the convenience of the internet, you never have to leave home.

Privacy No one knows you applied for a subprime mortgage loan.

Poor credit history is not a problem

You provide personal information to a secure website

Less processing time

Fast approvals

Savings on additional costs and fees

Notary comes right to your home

The drawbacks of applying for an online subprime mortgage loan include:

High rate of default- Borrowers with lower credit scores are more likely to default.

Changing interest rates- Short-term interest rates started out low, so the cost of the subprime mortgage was low. Lenders advertised these low rates as a teaser, and when short-term rates returned to more realistic levels, borrowers faced larger payments that they could not afford to pay.