lately with the US recession it's become a little more clear
as to the reality of sub-prime mortgages, and the consequences
of getting one if you don't clearly understand what you're
begin by first taking a look at the word sub-prime. Over the
past couple of years this word has become an everyday part
of our vocabulary, many have blamed sub-prime lending as one
of the primary causes for the recent financial meltdown. Let's
begin first by taking a look at how the dictionary defines
thing we need to take a look under : beneath : below
first in excellence, quality, or value.
basically when applied to lending what we are simply talking
about here is loans and or mortgages that are given to folks
with less than perfect credit situations. Now the media and
the banks would have you believe that all of these individuals
are deadbeats and the cause of the recent crisis but I'm here
to tell you my friends that is not completely true!
me explain, yes there are a very small group of folks who
took out these loans/mortgages knowing full well that they
would have a very difficult time making the payment and repaying
them back. And granted there may be even some amongst them
who had no intention of making the payments at all, but the
vast majority were everyday folks who due to circumstance
beyond their control found themselves with credit situations
that left them no other options than sub-prime loans.
were folks who had every intention of making the payments
going in but were on the razors edge in their actual ability
to do so. One small misstep in the economy or their personal
financial situation and they would be screwed,
so now youve got to ask yourself, if a lender knew this
going in why would they grant these folks loans - and its
money that the lenders stood to make from them loans was massive
and their greed got the better of their judgement, and thats
why we find ourselves in the mess we are in today!
am I saying that you should never take out a sub-prime mortgage
or loan, absolutely not. What I am saying is that before you
do so ask yourself the following questions:
Is a sub-prime one the only type of mortgage or loan you qualify
for? In other words are you absolutely positive that both
your credit and present financial situation leave this as
the only door for you to take! The first step in confirming
this is to know your credit bureau and score. You would be
stunned to learn how many borrowers think their credit score
is less than it actually is. In most cases they make this
assumption without ever checking their actual credit score,
something that can easily be done online in a matter of minutes!
Fully knowing your credit history and bureau is whats
going to help level the playing field with the lender and
save you money!
Can I afford the payments?
Now many of you are thinking, who would be crazy enough to
go into debt not knowing if they can or cant afford
to make the payments you would be surprised! In fact a fair
amount of borrowers who get into trouble do so because they
dont have a monthly budget! Thats right, its
not only this one payment you have to worry about, its
all of the rest of your financial obligations. Surveys and
studies have proven that more than 80% of individuals today
dont have a monthly operation budget, thats like
driving at night without headlights! So before you borrow
the money, make the budget!
Do I have an exit strategy? Now Im guessing that
you dont really want to pay the typical high interest
rates that sub-prime mortgages and or loans come with forever,
right? Sub-prime loans should never be viewed as anything
other than short term due to the interest rates, there should
always be an exit strategy going in. So whats yours?
How is your credit situation going to improve during the term
of this loan so that at the end of it you can get refinanced
at normal rates!
now, two more things you need to do before you sign for that
sub-prime mortgage or loan...
Shop around! Thats right, you may not believe it
but even in your situation you do have some limited choices.
Not all sub-prime lenders are created equal, by shopping around
you will discover that there is some differences in both the
rates, terms and fees. Even though you are not at a position
of strength financially, you should still make sure that the
terms you are getting are the best possible ones for you and
a credit inquiry has to be done by a lender every time you
apply for credit, its a good idea to let the lender
youre talking to know, that you have a copy of your
credit bureau for them to look at. This avoids them having
to put hits on your credit bureau which ultimately
only lowers your overall score. Since lenders are going to
want to see your most recent credit report make sure you get
a copy at or on the time you start shopping around.
Use your own lawyer! Before you sign anything have your
lawyer go through things to make sure that you fully understand
what youre signing. Some banks and lenders have their
own lawyers and they might say that by using theirs you will
save money for legal fees, dont do it unless you can
be assured that this lawyer is acting independently on your
behalf, make sure they are working for you and not the lender!
The last thing you want to find out one day is that there
is some little clause in your sub-prime mortgage
and or loan that you thought meant one thing, but as it turns
out means something completely else! This little extra expense
is well worth the peace of mind
thats it, follow the tips Ive just outlined above
and put yourself in the drivers seat when it comes to sub-prime
mortgages and or loans, good luck!