topic Re: Has anyone recently purchased a subprime loan? in General Credit Topics

Has anyone recently purchased a subprime loan?

homewardbound — Tue, 08 May 2007 18:00:51 GMT

I just filed Ch. 7 in March 07. I haven't yet received my discharge papers but most of my debts are showing $0 balances already. I have no cc's, a car installment loan in amount of $3,000 I pay on time along with all my other utility/rent bills, etc. I have no other debt whatsoever, but am desperately wanting to get out of the city and purchase a relatively inexpensive townhome for myself and my two daughters. My salary is decent and definitely can afford the property if I had good credit and would get a good rate. But right now my score is 550 and I am wondering what kind of offer I might get it any and if any of you have advice or know what the current situation with subprime loan is.

Re: Has anyone recently purchased a subprime loan?

Anonymous — Tue, 08 May 2007 18:09:50 GMT

@homewardbound wrote:
I just filed Ch. 7 in March 07. I haven't yet received my discharge papers but most of my debts are showing $0 balances already. I have no cc's, a car installment loan in amount of $3,000 I pay on time along with all my other utility/rent bills, etc. I have no other debt whatsoever, but am desperately wanting to get out of the city and purchase a relatively inexpensive townhome for myself and my two daughters. My salary is decent and definitely can afford the property if I had good credit and would get a good rate. But right now my score is 550 and I am wondering what kind of offer I might get it any and if any of you have advice or know what the current situation with subprime loan is.

Pleeeeeeease stay away from subprime loan. I have one and I thank GOD everyday that I broung my loan from $113K to $31K. My payment were going up up & up every six month. I still have the subprime loan with a 12.5% interest rate and trying to ref. but because of my BK-13 and late payment no banks want to give me a loan. Good luck

Re: Has anyone recently purchased a subprime loan?

Tuscani — Tue, 08 May 2007 18:50:18 GMT

I wouldn't go as far as saying stay away... rather sit down and figure out the numbers and decide how bad you want it, what sacrifices you are willing to make and how much you can afford. Not all sub-prime loans are bad. Many people take a sub-prime loan and refinance once their credit improves.

Re: Has anyone recently purchased a subprime loan?

homewardbound — Tue, 08 May 2007 18:57:07 GMT

I'm curious to know what type of loan you had, I'm assuming it was an ARM? Was that the only option available to you? Can you explain that to me - I definitely want to keep your experience in mind when I am trying to make decisions. Thanks.

Re: Has anyone recently purchased a subprime loan?

Anonymous — Tue, 08 May 2007 18:58:46 GMT

Yes to what Tuscani advised. It's true not all Sub primes are rip offs. But make sure you READ everything and know exactly what your are getting yourself into. If it is very confusing, budget in a few extra hundred dollars and have a Real Estate Attorney go over it with you. You are going to get hit with bad interest rates but if you know what you are going to pay each month and you know you can afford it then Sub Primes are all evil. but I would advise to stay away from ARM'S with a sub prime and be very leary of interest only for x amount of years. but you can do it. It will be hard right now with all the foreclosures that has happend in the past couple of years, so be prepared to have the possiblilty to hold off for a couple of years until your credit can get back up so it's more affordable.

Re: Has anyone recently purchased a subprime loan?

Anonymous — Tue, 08 May 2007 19:32:30 GMT

Yes, I do have an ARM. I started with a 7% interest rate and now I am with a 12.5%. Could you imaging paying 12.5 in a 113K loan? The mortgage broker did a great job screwing me up!! Regardless if is an ARM or not, I don't recommend this to anyone. Remember once the interest rate goes up so will your mortgage payment them within two years or so you need to ref again and that means more expensive. You want to reduced the mortgate payment not increases it. Just take your time. I suggest to wait until you can get a regular loan.

Re: Has anyone recently purchased a subprime loan?

Anonymous — Tue, 08 May 2007 20:37:14 GMT

homewardbound,

You will need to have money for a considerable down payment as well as assets for reserves. (usually 2 months of your PITI payment) I agree with Tuscany, look at the numbers and go from there. Rarely, is real estate a bad investment!

Regarding subprime loans: ARMS or Adjustable Rate Mortgages and Interest Only Mortgages are not bad loans. They need to be used as a financial tool to get you from point A to point B. If you are in the subprime area, you will not have the option of a 30 Year Fixed. Your choices will almost always come down to:

Option Arm (Not recommended)
ARM
Interest Only (Same as ARM, but payments only cover Interest)

Even if you were an A paper client, often times a short term ARM is your best choice. If you are an investor who relies on appreciation and values cash flow, the Option ARM may be your best choice.

True, there has been a meltdown in the subprime market. The meltdown is more a reflection of Loan Professionals that were more concerned with their finances than their clients and also people speculating while buying their home. The actual loan product was not the problem.

Re: Has anyone recently purchased a subprime loan?

Anonymous — Tue, 08 May 2007 20:49:25 GMT

You filed BK two months ago, and you're mortgage shopping ... the shark subprime lenders will smell blood in the water. You may be able to find one that will give you a mortgage, but it likely will be on such horrible terms that you won't be able to afford it. Please give it (and yourself) some time.

Re: Has anyone recently purchased a subprime loan?

Anonymous — Tue, 08 May 2007 21:16:14 GMT

That is the best advice so far.

Re: Has anyone recently purchased a subprime loan?

homewardbound — Tue, 08 May 2007 23:47:47 GMT

Thanks for the advice - I haven't been shopping yet, only reading about these types of loans and wanting to know other's experiences with them. I do realize I would be smarter to wait two years, but ideally don't want to wait that long. I'm just trying to get a general sense of how bad my situation is. I have two young daughters and want to get them placed in a good school district soon, etc.

Re: Has anyone recently purchased a subprime loan?

Anonymous — Wed, 09 May 2007 00:41:56 GMT

Whether it's a prime or a subprime lender, there is always a loan program for which you would qualify but would in no way be able to keep the payments current. Predatory lending practices are still predatory lending practices.

The obsessive mantra of "subprimes are evil" will, IMHO, lead to the predators calling themselves something else, lots of people will continue to default on loans they cannot afford, and the media will magically discover this "new phenomenon" in 3-5 years with Dateline, 20/20, et al. stories about age old predatory lending practices. Maybe they'll be Prime Lite, Prime Like, or Prime Ate (as in it ate my money and my credit).

A conman goes by many names. More often he changes names the more effective he'll be at conning.

Re: Has anyone recently purchased a subprime loan?

Anonymous — Wed, 09 May 2007 04:13:59 GMT

Noah_Bodie wrote:
Maybe they'll be Prime Lite, Prime Like, or Prime Ate (as in it ate my money and my credit).

LOL. Maybe Diet Prime.

To the OP: It's good you are checking out your options, even if some of us have the opinion that delaying your purchase may be the best course of action. Educating yourself is never a waste of time.

Re: Has anyone recently purchased a subprime loan?

Anonymous — Thu, 10 May 2007 04:07:56 GMT

Homewardbound:

There are many of us considering home loans but you should wait until you are in prime territory. Interest rates above 10% is awful. Besides with the contributors we have here at this forum, them and some hard workon your part should improve your scores to reach your goal of home ownership and more!

Re: Has anyone recently purchased a subprime loan?

homewardbound — Thu, 10 May 2007 16:44:57 GMT

Thanks for the advice. Do you think it would take a full two year to be in "prime territory" necessarily? My score is 550 right now and I am beginning to work very hard at rebuilding credit by obviously paying all bills on time and opening a small credit card, etc.

Re: Has anyone recently purchased a subprime loan?

Anonymous — Thu, 10 May 2007 17:17:12 GMT

I don't see why not. Just get any and all CO's and collections,if you have any, resolved, don't take on too much credit, if anny, from here on out. Besides just your FICO score, you're debt to income is just as important, so just don't pick up some silly needless debts just to get a quicker point increase. This will also cut down on inquiries as well.

make sure all your bills including Utilities are all up to date, Yes they look at their little CRA as well. Stay the course, be on time, lower your debt to Income and you should be rewarded in the end. Good luck.

Re: Has anyone recently purchased a subprime loan?

SoulSmilen — Fri, 11 May 2007 02:46:54 GMT

This is probably obvious, but I wanted to throw it out there just in case.

Don't forget to check out 1st Time Buyer financing, as well. Find out which programs are available in your state and see if you qualify. Many people think "1st Time Buyer" is literal, but it isn't always. Some states have plans where you can't have had a mortgage in only the previous X years.

Re: Has anyone recently purchased a subprime loan?

Anonymous — Fri, 11 May 2007 03:57:01 GMT

FHA, VA and naca.com are three sources for a mortgage that don't look at your FICO scores. With FHA and VA you need a year of no lates. I think the same is true of naca. They do however look at your DTI very carefully. Not sure how long out of a BK one needs to be. Check with a mortgage broker who can do FHA. That will give the max number of options.

Re: Has anyone recently purchased a subprime loan?

Anonymous — Fri, 11 May 2007 05:46:22 GMT

I just looked up Fannie Mae guidelines for bankruptcies and it looks like 24 months after discharge is the soonest you could be considered eligible for a traditional A-paper conforming loan. Fannie Mae's online underwriting system is used by a lot of lenders to determine eligibility for prime mortgages.

In addition there are lenders who will give you a mortgage based solely on your credit score regardless of your past mortgage payment history and bankruptcy seasoning -- the minimum FICO they'll consider is a 540. The rates can be decent if you have a good credit score.

There are other opportunity costs to consider besides a higher rate today versus a lower rate tomorrow based on your FICO. Some of the non-prime lenders were offering fixed rates a few years ago that are equal-to or better than today's prime rates. Home prices also increased significantly in several parts of the country over that same time period. Now, sub-prime lending guidelines are more restrictive (which can mean more expensive) because of recent problems in the subprime industry, and some markets are seeing drops in property values. Sure wish I had a crystal ball.

Message Edited by Cogent on 05-10-2007 10:46 PM

Re: Has anyone recently purchased a subprime loan?

Anonymous — Fri, 11 May 2007 20:41:12 GMT

There is really no set "time frame" to when you should start shopping for a mortgage, but I will tell you this from experience and numerous loans I've written.

1. Get above a 580 FICO

2. Get your DTI below 45%

3. Wait 1yr after your discharge date (my bank won't even look at you without it being discharged for a year and having 1 upstanding revolving credit line sense the BK)

Until you can substantiate these, it's really not in your best interest to get your hopes up as you won't like the outcome.

As far as Subprime loans, there is nothing wrong with them. They are a great tool to help those out that need a helping hand buying a home. I highly recommend using a "power house" bank for the referal (Chase, Wells, BofA) that way you make sure you aren't being fed to sharks by shopping the phone book. My bank has numerous partnerships with contracted sub prime lenders all around the world (i had around 1,200 reputible on my books about 6 months ago) that are constantly monitored by the recommending banks. As far as the loan package goes, it all has to do with your current situation and what you can afford, I know for a fact that there are sub prime programs for 100% financing (80/20) 30 yr amortized with no arms/int only options if that is the route you want to go.

Message Edited by Acidsniper on 05-11-2007 01:41 PM

Re: Has anyone recently purchased a subprime loan?

homewardbound — Mon, 14 May 2007 14:10:37 GMT

Acidsniper - thanks a lot for the advice about waiting one year and having a minimum score of 580. I think I will definitely be over 580 in one year and am financially on a much better track than I was before. I need some more advice on this: Do you think that in one year with your listed requirements, would I still need to have a substantial down payment in order to get the loan? I am not sure if this loan would still be considered "subprime".

I am trying to move into the same neighborhood as a friend of mine, and she and I noticed a townhome a few doors down from hers that is selling for a great price. The owner is selling directly without representation and is very willing to negotiate. I had asked about a rent to own option and he seemed to be open to this. The rent would be higher than what I am currently paying, so I wouldn't be able to save quite as much money if I were to move into the townhome now and purchase in one year, but I do think that he would be open to applying a portion of my rent towards the cost of the home.

What are your thoughts? Any suggestions?