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Sub Prime Mortgage Loans
Author David Schneider | Nov 14,2007
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Sub prime mortgage loans are designed for people who do not have the characteristics that are required to qualify for a traditional loan. While the name of these loans sounds a bit shady, they actually are great mortgages that help millions of people get into the homes of their dreams each year. If you are self employed, if your credit rating is not perfect, if you have a limited credit history or if you have income that is hard to document, then you need to consider applying for sub prime mortgage loans.
Cons of Sub Prime Mortgage Loans
Like any other mortgage product, it is important to understand the potential drawbacks of sub prime mortgage loans before you apply for one. The main potential drawback of a sub prime mortgage is that they tend to have higher interest rates. Generally, you will be charged between one and five points more in interest for sub prime mortgages than traditional mortgages. The extent of the interest rate difference is going to depend on your credit risk factors such as your FICO score and income source.
Advantages of Sub Prime Mortgage Loans
While sub prime mortgage loans tend to be more expensive than traditional mortgage loans, they also have a cornucopia of advantages. For example, sub prime mortgages are easy to qualify for, they allow a financing option for people normally rejected by traditional loans and they offer borrowers with more financing options and loan products. The biggest advantage that sub prime mortgage loans offers is the possibility to be a homeowner.
Sub prime mortgage loans are designed for people who do not have the characteristics that are required to qualify for a traditional loan. While the name of these loans sounds a bit shady, they actually are great mortgages that help millions of people get into the homes of their dreams each year. If you are self employed, if your credit rating is not perfect, if you have a limited credit history or if you have income that is hard to document, then you need to consider applying for sub prime mortgage loans.
Cons of Sub Prime Mortgage Loans
Like any other mortgage product, it is important to understand the potential drawbacks of sub prime mortgage loans before you apply for one. The main potential drawback of a sub prime mortgage is that they tend to have higher interest rates. Generally, you will be charged between one and five points more in interest for sub prime mortgages than traditional mortgages. The extent of the interest rate difference is going to depend on your credit risk factors such as your FICO score and income source.
Advantages of Sub Prime Mortgage Loans
While sub prime mortgage loans tend to be more expensive than traditional mortgage loans, they also have a cornucopia of advantages. For example, sub prime mortgages are easy to qualify for, they allow a financing option for people normally rejected by traditional loans and they offer borrowers with more financing options and loan products. The biggest advantage that sub prime mortgage loans offers is the possibility to be a homeowner. |
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