If your credit rating is low–normally, under 620–you might need to apply for a subprime mortgage loan. These loans come with a significant drawback: high interest rates. Lenders charge higher rates for these loans because they consider subprime borrowers to be higher risks for default. If your credit rating is low, it is often because you have missed several payments or produced several overdue payments before. Your only choice to be eligible for a home mortgage, then, could be a subprime loan.
Telephone mortgage lenders, and inquire what fees and rates they charge. Explain that you have a poor credit score and also will probably have to take out a subprime home mortgage. Work with the creditor with whom you feel comfortable.
Collect and create copies of the financial documents that your lender will use to confirm your income and employment status. They include your last two paychecks, a signed notice from your employer stating how long you have worked at your current job, your most recent federal income tax return along with your bank savings and checking account statements.
Make copies of your credit card bills, auto loan statements, student loan statements and some other regular invoice that proves that you have been making payments on time. You wish to show your lender that you’ve changed your negative spending habits and are currently paying your debts in a timely manner. You wish to show that your late or missed payments are on your past.
Send the copies of your invoice statements and other financial records to your lender. Send them by facsimile, email or regular mail, whichever your creditor favors.
Offer your creditor permission to run your credit score. This will turn your credit rating. Lenders usually book their very best interest rates for borrowers with credit scores of 750 or higher. But if you are applying for a subprime mortgage loan, meaning that your score is below 620, you must expect to pay high rates of interest. These rates vary by lender.
Complete your lender’s loan application form. This form will ask you basic questions regarding your annual income, salary, length of debts and employment. Send it right back to your creditor once you’ve completed it.
Signal your lender’s closing records if the creditor approves your petition. Only sign, though, if you are delighted with the rate of interest offered to you. Rates on subprime mortgage loans are high, but you want a monthly payment which you can easily manage.