Subprime Mortgage Loans - 3 Questions To Ask Your Subprime Mortgage Broker
Carrie Reeder
1. What Is Your Fee?
Before you begin working with a subprime mortgage broker, ask how they are getting paid. Sometimes they charge you an upfront fee, other times they are paid by the mortgage company.
Upfront fees don't guarantee you the best deal, but they do reduce the broker's reliance on mortgage companies' fees. Instead of looking at who offers them the best payoff, they are looking at your interest.
Fees paid by the mortgage company can still mean you find a good deal. Most brokers are able to negotiate lower rates for you, so you still come out ahead. Using this type of broker also allows you to work with a couple of brokers, making sure you find the best deal.
2. What Are The Loans Fees?
Even when brokers present you with rate quotes, take the time to look at fees and points. The APR should include both the rates and fees. It is required to be disclosed before signing a contract so you can make a real comparison. Sometimes the lowest rate loan has the highest closing fees and isn't the best deal.
The rates presented to you are somewhat flexible. You can reduce them by paying more points or increasing your down payment. Points only make sense if you plan on keep the loan for a number of years.
3. Are There Early Payment Fees Or Other Clauses?
Also check for early payment or other fees. Subprime mortgages are often refinanced when your credit score improves. Check to see if you can pay a point to waive the early payment fee if you plan to refinance.
Some subprime lenders will automatically refinance your loan for better rates after two years. This can save you thousands on later refinancing costs. Just like any loan offer, check the rates with other packages.
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