Anyone who listens to the news, reads a newspaper or surfs the internet has heard the term subprime mortgage. This past year has been riddled with stories about mortgage fraud, delinquencies and foreclosures. All of these are good reasons why it's best to work with a reputable mortgage broker. This ensures you receive the proper guidance and education necessary to make a proper decision when buying your home.

With all the talk about subprime mortgages, I thought it would  be helpful to explain what is often called a "bad credit" mortgage. This type of mortgage is offered to potential buyers who have a high debt-to-income ratio, cannot verify their income or have a poor credit history.

Subprime mortgages:

• involve higher risk, so require a larger down payment
• have higher interest rates (from 1% - 5% higher) due to that risk
• frequently have a higher loan-to-value ratio
• commonly include a prepayment penalty
• often include a balloon payment

If you have a credit score of less than 620, a  subprime mortgage might be the answer for you if you're having difficulties qualifying for a conventional loan. If you currently own a home, you can use a subprime loan to clean up your credit. Once that has been accomplished, you can then refinance for a lower rate on the balance that remains on your mortgage.

If you believe you qualify for a subprime mortgage, whether for a purchase or refinance, we'll be happy to work with you to determine the best alternative for you and your specific financial situation.