Sub-prime mortgages offer financing for those with poor credit to finance the purchase of a home. Todays sub-prime mortgages offer low down payment options with no private mortgage insurance (PMI). As a result, more people are finding it easier to buy a home.
Sub-prime Mortgage Options
Sub-prime mortgages come in as many flavors as conventional loans. Just like with a conventional loan, low down payments or zero down will increase your interest rate. However, you have no PMI premiums to pay.
Another option is to buy points to lower your interest rate as well, but this only makes sense if you plan to keep your mortgage for seven or more years. A better plan is to improve your credit score, and then refinance in two to three years for a conventional loan.
More and more financing companies are offering sub-prime mortgages. Even Freddie Mac and Fannie Mae offer sub-prime programs. So to find the best rates and terms, you should request quotes from both conventional and poor credit lenders.
When you are comparing lenders, look at the APR for a quick check. The APR includes both interest rates, points, and fees. However, you...