The Quest for a Sub Prime Home Loan – taux hypothecaire quebec
Generally speaking, there are two types of mortgage borrowers: prime and sub prime. A prime borrower is one with a good credit score, not too much debt and a history of paying bills on time; this borrower will receive the best rates on the market – taux hypothecaire quebec. There is no real definition of what a sub prime borrower is, but in general, it is a borrower with lower credit score and too much debt and late payments. As a general rule, a credit rating of under 660, with a debt to equity ratio of over 50% and two or more late payments in the most recent year, will designate a sub prime mortgage candidate. 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. The risk a lender takes on a loan is factored into the pricing of the loan, so sub prime borrowers have to pay a higher interest rate. In recent years, the combination of falling housing prices and rising interest rates have forced many of these sub prime home loans into foreclosure, and therefore banks have become more strict than ever. One of the first steps a potential home loan borrower should take is to shore up his credit standing so that his score will meet the bank’s more stringent criteria. By paying bills when due and reducing debt, the borrower will be able to exhibit to the lender good recent activity. The borrower should make sure to keep all records so that he can show the lender the recent history. One case, however, where a borrower will not be able to obtain financing is the case where the outstanding home loan balance is greater than the market value of the home. A good first step to take is to talk to a mortgage consultant who has a great deal of experience. These brokers have many more contacts, and a lot of differentalternate solutions that he is aware of to help the borrower. In addition, an experienced, reputable broker will be very up front about advising a client when there is no hope of obtaining a mortgage. There are brokers who will accept an application fee even though all the information tells them that a home loan is impossible, so beware.
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