One thing that a lot of people don’t talk too much about is Subprime loans. In this blog, Jeff Suter of CMG Financial and I will discuss what those are and why you would want to use them.
What is a Subprime Loan?
Life happens. If you’re thinking, can I buy a home with low credit score? That’s the main reason non-prime exists. Non-prime loans are also known as Subprime loans or some people also refer to this type of loan as Non-qualified loans. Subprime loans are given to people who have found themselves in a situation where they can’t afford to own a home or wouldn’t qualify for traditional mortgages.
Situations That Can Prevent Borrowers From Having A Traditional Mortgage
There could be something bad that has happened that prevents them from having a qualified mortgage. One example of that would be bankruptcy. Bankruptcies can be due to a business failing, bad life decisions, or medical issues.
How Do Subprime Loans Work?
When life happens, that doesn’t mean you can’t own a home. With subprime loans, generally, you’re going to be looking at 10% down. So it will be a 90% loan-to-value depending on the situation and can generally go up to $1.5 million. Non-prime can go quite high and it is going to obviously have a higher interest rate.
It comes down to putting a plan together for your specific situation. Whether you’ve had a foreclosure or gone into bankruptcy, the goal is to get you in a home that you can afford and ultimately put a plan together that gets you back into a qualified mortgage as fast as possible.
Consulting a with a Professional
In certain situations, you might have to take one type of loan like this where it’s at a higher interest rate, but it does get you into a home. Looking at the pros and cons – it’s usually better if you can buy a home versus continuing to rent.
As lenders and Realtors, we like to offer solutions, we like to let people know where they are, and what the next steps would be to get to where they want to go.
Sometimes, taking on something that is not ideal, but works in the situation that you find yourself in can still end up being positive to you so you are not paying somebody else’s mortgage or paying the landlord versus paying something that’s hopefully building equity over time. Refinancing is a viable option but invest in yourself, not somebody else. That’s the key.
If you find yourself in a place you never thought you would be, we’re here again to give you options to look at your specific individual situation. Feel free to reach out to us, there’s no judgment, there’s no right or wrong. We are all where we are in our life. Decisions that we’ve made – some are better than others, but our goal is to help you have a bright future to help get you into homeownership.
Watch the full video here: