A Texas home buyer looking for a great deal on a subprime mortgage Houston lenders have on offer must first do a lot of preparation to facilitate fast approval. It's not so easy now, because it is an excess of these very subprime mortgages that triggered the real estate crash that eventually lead to a global recession. Safeguards have since been put in place to prevent abuse by lenders. Practically speaking, this means that borrowers have to fulfill a lot more requirements.
This only applies to people with credit scores below 620 who do not qualify for traditional fixed-rate home loans. Their credit history will likely include missed or delayed payments, and maybe even a prior foreclosure. In such cases, lenders will take the additional risk only if they can get higher interest from the borrower through a variable rate proposal.
The interest rate in such a loan is pegged to an index and usually hiked annually after an initial low-interest period. Before the 2007-08 crash, these loans were easily available with little in the form of down payments and paperwork. The problem is that a lot of subprime mortgages approved back then have ended up underwater.
The home owners who took out these mortgages don't have the income to meet the high payments, and even foreclosure would not be enough to clear the loan. This is why every lender now requires high-risk borrowers to provide detailed paperwork and higher down payments. Anywhere in between 20% to 40% of the property value has to be put up by the buyer in order for a lender to approve a loan for the remaining amount.
One good thing is that there are no penalties for prepayment. The whole concept is based on an assumption that the borrower's credit will improve soon and allow for faster repayment. The same holds true for refinancing to convert the proposal into a low-interest mortgage with relatively smaller monthly payments.
The most difficult part is finding the right lender. No lender will advertise the fact that they are still subprime lenders. The trick is to contact and make inquiries with a host of lenders. Most every lender will either be able to do it or will refer the customer to an affiliated firm that handles subprime proposals.
Before talking to anyone, put together a file that contains all the required documentation. Include the latest income tax return, the two latest pay slips, and an updated bank statement. A letter from the borrower's employer needs to be included, stating that the applicant is currently employed and in good standing.
It's also a good idea to put together a file that shows all the recent bills that have been paid off by the applicant. For instance, proof that credit card bills, car loan payments, etc. Are being met shows that the borrower is a fiscally responsible person, and the negative mentions in the credit history were part of a phase that is now in the past. This is the only way to get the best possible deal on a subprime mortgage Houston lenders may offer for home buyers with a bad credit history.
This only applies to people with credit scores below 620 who do not qualify for traditional fixed-rate home loans. Their credit history will likely include missed or delayed payments, and maybe even a prior foreclosure. In such cases, lenders will take the additional risk only if they can get higher interest from the borrower through a variable rate proposal.
The interest rate in such a loan is pegged to an index and usually hiked annually after an initial low-interest period. Before the 2007-08 crash, these loans were easily available with little in the form of down payments and paperwork. The problem is that a lot of subprime mortgages approved back then have ended up underwater.
The home owners who took out these mortgages don't have the income to meet the high payments, and even foreclosure would not be enough to clear the loan. This is why every lender now requires high-risk borrowers to provide detailed paperwork and higher down payments. Anywhere in between 20% to 40% of the property value has to be put up by the buyer in order for a lender to approve a loan for the remaining amount.
One good thing is that there are no penalties for prepayment. The whole concept is based on an assumption that the borrower's credit will improve soon and allow for faster repayment. The same holds true for refinancing to convert the proposal into a low-interest mortgage with relatively smaller monthly payments.
The most difficult part is finding the right lender. No lender will advertise the fact that they are still subprime lenders. The trick is to contact and make inquiries with a host of lenders. Most every lender will either be able to do it or will refer the customer to an affiliated firm that handles subprime proposals.
Before talking to anyone, put together a file that contains all the required documentation. Include the latest income tax return, the two latest pay slips, and an updated bank statement. A letter from the borrower's employer needs to be included, stating that the applicant is currently employed and in good standing.
It's also a good idea to put together a file that shows all the recent bills that have been paid off by the applicant. For instance, proof that credit card bills, car loan payments, etc. Are being met shows that the borrower is a fiscally responsible person, and the negative mentions in the credit history were part of a phase that is now in the past. This is the only way to get the best possible deal on a subprime mortgage Houston lenders may offer for home buyers with a bad credit history.
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