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Life with a sub-prime mortgage
By adamg on Tue, 03/20/2007 - 7:54pm
Eeka has one (originally from Ameriquest, no less), and she's getting tired of lazy reporters blaring that everybody who has one is a no-account loser deceived by an evil loanshark:
... I was not coerced into buying a house I can't afford. I am in absolutely no danger of losing my home. I pay my mortgage on time every month without difficulty. I definitely did my homework regarding the different types of rates and am not going to encounter anything unexpected. I also am not a buyer with bad credit. ...
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Comments
If you don't have a good
If you don't have a good FICO score, but essentially have good or no credit, you can find a mortgage company or bank that does "manual underwriting" instead of taking out a subprime loan. To do manual underwriting, they will check references, make sure you've paid your rent on time or early for the last couple of years and verify income via references and tax returns -- you know like in the good 'ole days.
It's hard to find someone who will manual underwrite, but you *can* find it. Big banks and mortgage companies won't want to do it because it takes much more time than just getting the FICO score by a click of a button, but they *could* do it.
You'll save tons of money vs. a sub prime loan.
Yes - Manual Underwriting is the way to go
I went this "manual underwriting" route with the broker for my mortgage, because I had little or no credit history in the US, and not three years of tax returns since I'd only been in the US for two years. At the time, I assumed this was what everyone did.
I do get those letters from Ameritrade etc saying "Do you want to change that fixed rate mortgage for a sub-prime one, plus we will give you a lot of cash which will then add to your loan". um, no.
30-year fixed rate mortgages really are amazing, something that I think is taken for granted in the US (I believe only Denmark has a similar system). In Dublin, where I am today, people pay a lot more money for smaller houses with mortgages that have floating variable rates and get less mortgage interest tax relief.
I think that's similar to what they did
The broker I used had me send in bank statements to verify my self-employment income and got a reference from my landlord. My FICO score is actually great, but he said that the best 20 or so rates were from lenders that required five years of income at the current level.
http://1smootshort.blogspot.com
I think I technically have a
I think I technically have a sub-prime mortgage as well, but it made perfect sense for my partner and I when we purchased: our incomes were lower because we'd only recently graduated (or I had, anyway) yet we were reasonably confident that, within 5 years, we would certainly be making *more*, not less. That turned out to be true, and as a result we were able to enter a housing market that we would've otherwise been locked out of.
As long as you really go in knowing what to expect, and understanding the pitfalls, these mortgages can really be a major stepping-stone for first time buyers. They are not universally "bad" things, but you need to go in understanding the risks and understanding that there are certain things you need to achieve before your initial rate expires.
Spamming sub-prime lenders
If a few more sub-prime lenders are forced out of business, hopefully I'll get fewer spam e-mail messages advertising for them.