Subprime Lending

Subprime lending is back now but with a twist.

Typically, they carry an interest rate that is sometimes as high as 10 percent, about three times
the current average rate of a conventional 30-year-fixed rate mortgage. They also typically
require a down payment of about 10 percent.

A 10 percent down payment is not remarkably low (Federal Housing Administration-insured
mortgages only require a 3.5 percent down payment), but it is still less than half of todays’
average, which is a standard 5% as a down payment.

The mortgage’s most exotic — and risky — feature, however, is probably its brief length. Though
a seller-financed loan is frequently structured like a 30-year loan, it often forces a borrower
to pay off the outstanding balance of his mortgage in from three to seven years in a “balloon

Still there are advantages for the less than perfect borrower who has the down payment
but perhaps not the credit scores and has to wait years to get back into the game. This way
borrowers get credit-worthy- again now versus later. Borrowers who have bankruptcies,
foreclosures or dings on their credit that they have a hard time removing are eligible candidates.

Another group are the borrows that need short term money for fix and flip properties, foreign
nationals, B & C lending or out of the box lending.

Speak to your mortgage loan officer for more details or email us at

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