Subprime mortgages offer more flexibility with down payments than conventional home loans. You can choose to put nothing or over 20% down. And with a subprime mortgage, you don't have to worry about paying private mortgage insurance.
Zero-Down Mortgages
Zero-down mortgages allow people with little money for initial costs to buy a home. Even with a zero-down mortgage you can expect to pay loan fees and points, which can still add up to a couple of thousands. However, there are financing plans that wrap loan costs into the mortgage.
The basic zero-down mortgage consists of one loan or two. If your lender decides to split your mortgage, you may need to find another lender to carry the second mortgage.
Zero-down mortgages come at a cost of higher interest rates. They also have larger monthly payments since the mortgage is for a larger amount.
Large Down Payments
A large down payment adds equity to your property quickly. You also have lower monthly payments by having a smaller mortgage. In some cases, a large down payment can qualify you for a loan, in spite of a poor credit record.
If you have the cash for a large down payment, you may also want to look at purchase points up front. You can lower your interest rate, saving you thousands if you keep the loan for several years. You can also waive prepayment fees, usually by paying a point.
Subprime Lenders
Subprime lenders offer a variety of financing solutions. If you are unsure how much you want to borrow, start by requesting quotes from lenders for different financing options. This way you can compare numbers and look for a lender who offers the best rates and terms.
You can use the internet to gather this information quickly. You can get quotes through websites or email. However, don't give a lender permission to submit a financing bid until you are ready to apply. Every time a financial company checks your credit history, your credit score takes a hit. Even if you don't follow through with the loan, it still affects you. Fortunately, most lenders are willing to provide quotes to allow you to make the best financial decision.
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