Sub-prime loans are becoming more readily available through traditional lenders. Even with a bankruptcy or foreclose in your credit history, you can still find financing for the purchase of your home. The key to sub-prime mortgages is to do your research and compare both terms and rates.
Your Credit History
A poor credit history doesn�t have to send you running to sub-prime lenders. For one, you may still qualify for an A loan, reserved for people with good credit. If your bankruptcy was four or more years ago and you have established a good payment history since then, your FICO score is probably over 600, the requirement for an A loan.
Through FHA loan programs, you can apply for a loan after two years of a bankruptcy or foreclosure. VA loans also look more leniently on past credit problems. In the end, don�t assume that because you have an adverse credit history you have to apply for the higher interest sub-prime loans.
If you find that you do have bad credit, you can still work with a traditional lender, who may offer you better interest rates. As financing companies expand their financing options, more and more companies are adding services for B, C, and D loans.
Sub-prime mortgages are based partly on your credit history, but largely on your mortgage or rent payment history. You will want to provide proof of your rent payments by sending copies of your rent receipts or checks. Mortgage payments can be verified through your credit report.
Sub-prime mortgages are just short term financing options. Once you have improved your credit history, you can refinance your mortgage for better rates.
When you start your search for a sub-prime lender, include all lenders in your investigation. Request quotes from traditional lenders as well as those who specialize in poor credit financing. Compare everyone�s financing packages to find the best rates and terms.
Ideally, you want to find a low APR with no prepayment fees. Unless you plan to keep your mortgage for seven or more years, it is probably not worth paying points for lower rates. You may also find that an ARM will provide lower rates with more buying power than a fixed rate mortgage.