Medicare Supplement – Insurance Quotes

There are two types of borrowers in the home loan market- prime and sub prime. A borrower with a good credit score and low debt, and he is careful about paying his bills on time, he is a prime borrower.

On the other hand, a borrower with a bad credit score, high debt and who always pays his bills late is a sub prime borrower. As a rule of thumb, a lender will consider someone with a credit score of less than 660 and more than two payments that have been more than 30 days overdue in the last year, and debt to income ratios of over 50%.

In addition, even if none of these is true, if the potential borrower had either a bankruptcy or foreclosure in the last five years, he will be considered a sub prime borrower.

Banks base their interest rate on the risk they take on the borrower, so it goes without saying that sub prime borrowers will have a less favorable interest rate.

Rising interest rates and falling home prices have combined to contribute to the default on hundreds of thousands of these so-called “sub prime loans”, and now lenders are not willing to lend to any but prime borrowers.

A borrower who thinks he may have a problem as a sub prime borrower should immediately take steps to improve his credit standing. Being especially diligent about current bills will help, since they place a lot of weight on the prior twelve months history.

The prospective borrower should also make sure to maintain good records and be willing to document all of his recent “good” credit practices.

Be careful, however, if your outstanding balance on your mortgage is greater than the market value of your home-you are unlikely to get a loan if this is the case.

One of the best ways to find out if you will qualify for a mortgage is to consult with a reputable mortgage broker consultant. Because of their exposure to many different types of loans, as well to many banks, an experienced broker may find the right solution.

A good broker will also have the sense to tell a borrower that his case is very poor and he will not receive a loan.

Be wary of false promises that cannot lead to a mortgage, especially if they involve application fees, which will be due whether the mortgage is granted or not.

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Tags: Insurance, mortgage insurance, mortgage rates, mortgages

This entry was posted on Friday, April 30th, 2010 at 4:01 pm and is filed under Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.