Avoiding PMI The easiest way to avoid PMI is to make a cash down payment of 20% or more. Potential sources of additional cash include: Borrowing against your 401(k) retirement plan Taking a margin loan against your stock Asking relatives for a gift Refinancing your car and taking cash out Selling your car, jewelry, etc. In the event you are unable to make a 20% cash down payment, consider...

Sub-Prime Mortgage Loans - Who Qualifies For A Sub-Prime Loan?

Carrie Reeder

Sub-prime mortgage loans are designed for those who don't qualify for "A" rated loans, typically those with a FICO score of less than 650. They also cater to those desiring unconventional terms, like a jumbo loan. As with any lender, to find the best financing, you have to compare mortgage loan offers.

Who Qualifies For Sub-Prime Loans?

Anyone can qualify for a sub-prime loan, no matter their credit history. Even people with excellent credit may choose to work with a sub-prime lender to work out special terms.

When it comes to mortgage loans, sub-prime lenders don't decline applications. Rather, they present terms, which you can choose to accept or decline.

For instance, a person could discharged a bankruptcy and apply for a mortgage the next day with a sub-prime lender. The lender would likely charge 12% above conventional rates and require a 50% down payment. The option is to either take the loan or wait two years for much better terms.

What Sub-Prime Lenders Offer?

Besides flexibility with terms, sub-prime lenders offer near conventional rates. On average, sub-prime lenders charge 1% to 2% above conventional rates for every drop in credit grade. However, large cash reserves or down payments can offset a negative credit history.

Sub prime lenders don't require private mortgage insurance - a real savings if you don't plan on a down payment of 20% or more. Lenders also offer refinancing options in your mortgage, saving on closing costs in the future.

Who Provides Sub-Prime Loans?

It used to be that only unconventional financing lenders offered mortgages to those with poor credit. But now virtually all banks and financing companies deal with sub-prime loans. For the lowest credit ranks, you still need to work with a sub-prime lender.

To find the right sub-prime loan, compare financing offers from several companies. You can work with a mortgage broker online to evaluate quotes in minutes or go directly to lender sites.

When requesting a loan estimate, provide as much information as possible, including your credit score. But don't let the potential lender inspect your credit report unless you want to see your credit score go down. Only allow the most promising lead access your report to complete the loan application.

About the author:

Carrie Reeder offers advice about Subprime Mortgage Loan Companies Online. View our Recommended Subprime Mortgage Lenders Online.

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