Subprime Mortgages

Mortgage Solutions will get you a Subprime loan despite a poor credit history.

A subprime mortgage lender enables high risk borrowers to obtain home mortgage loans. However, home ownership comes to subprime mortgage borrowers at a much higher cost than their counterparts.

To decrease their exposure to losses that may result from default, the subprime mortgage lender uses credit scores, loan to value ratios, and income verification to approve a home loan. Sub prime borrowers usually have poor credit histories. A bad credit history moves a subprime borrower into a riskier and hence a more costly risk classification.

Because these borrowers have poor credit histories, they are charged very high interest rates and fees. The lender also requires them to make a large cash down payments because research has shown that they default their loans more frequently than prime mortgage borrowers.

When risky borrowers of subprime mortgages default, they generally impose great losses to the subprime mortgage lender, to the insurer, and others that may have been involved in financing the home.

If the subprime borrower defaults the loan, it is unlikely that the lender will recover all of the outstanding balance from the sale of the property through a foreclosure proceeding. Usually, homes for sale due to foreclosure sell at discount prices relative to other houses on the market.

Also, the subprime borrower usually does not recover any equity from a foreclosure sale and may end up with a deficiency judgment. Some states allow a deficiency judgment to be used by the lender to collect any losses on a foreclosure from other assets that the borrower may possess.

Some lenders have taken advantage of high-risk borrowers because they have poor credit histories and lower incomes. As a result, they have charged them excessive interest rates and fees. Because of this, many states have enacted the predatory lending prevention act.

These acts have safeguards in place to protect subprime borrowers from predatory lending practices of subprime mortgage lenders. They also have means to enforce the act and penalties for lenders who violate the rules of the act. If you are considering obtaining a mortgage loan from a subprime mortgage lender, you should contact Mortgage Solutions. The state of Missouri has in effect a predatory lending prevention act, and we are more then happy to go over it with you in detail before asking you to commit to a mortgage loan.

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