Subprime Mortgages – How Large Of A Down Payment Do You Need?
Subprime Mortgages – How Large Of A Down Payment Do You Need?
Subprime mortgages offer flexibility in down payments compared to conventional home loans. You can choose to make no down payment at all or put down over 20%, and you won’t have to worry about private mortgage insurance (PMI) with a subprime loan.
Zero-Down Mortgages
- Overview: Zero-down mortgages are designed for individuals with limited funds for upfront costs. While you won't need to make a down payment, you will still face loan fees and points, which can amount to a couple of thousand dollars. Some financing plans allow these costs to be rolled into the mortgage.
- Types: Zero-down mortgages can be structured as a single loan or split into two loans. If split, you might need to work with a separate lender for the second mortgage.
- Costs: These mortgages often come with higher interest rates and larger monthly payments due to the increased loan amount.
Large Down Payments
- Benefits: A substantial down payment quickly builds equity in your property and results in lower monthly payments because the mortgage amount is smaller. It can also sometimes qualify you for a loan despite a poor credit history.
- Purchase Points: If you can afford a large down payment, consider paying for purchase points to lower your interest rate. This can save you thousands over the life of the loan if you hold onto it for several years. Paying a point can also help you avoid prepayment penalties.
Subprime Lenders
- Variety of Solutions: Subprime lenders provide a range of financing options. If you're uncertain about how much to borrow, start by requesting quotes from various lenders to compare rates and terms.
- Gathering Quotes: Use online resources to collect quotes quickly. Obtain these quotes through websites or email, but avoid authorizing a lender to check your credit history until you are ready to proceed with an application. Each credit inquiry can lower your credit score, so it’s best to minimize these checks.
- Comparing Offers: By comparing quotes and considering different financing options, you can make an informed decision and choose a lender that offers the best terms for your situation.
Subprime mortgages can offer flexibility in terms and down payments, but it's essential to weigh the higher interest rates and costs associated with them. By thoroughly researching and comparing options, you can find a financing solution that meets your needs.
