Texas Hard Money Lender: Texas Subprime Mortgage: How to get a Home Loan with Bad Credit

A Texas subprime mortgage, is one type of home loan that is available to Texas borrowers with a low FICO score. Learn all the details of subprime lending to determine the right loan for your unique credit situation.

Many potential homeowners with low FICO scores find themselves denied by banks when they try to qualify for a mortgage. Nearly 1 in 4 Americans have a FICO score of less than 640 which is considered to be a subprime credit score. With a subprime score it can be difficult to qualify for a traditional home loan. However, there are other options available for a A Texas subprime mortgage . Certain loan types and programs can help borrowers with low credit scores qualify for a home loan.

One type of loan available to borrower with bad credit is a Texas subprime mortgage . A subprime loan refers to a loan given to a borrower that represents a greater financial risk due to his/her credit score. A subprime loan is funded by a bank but does not have to meet the same underwriting guidelines as a prime loan. Subprime loans allow access to groups that would normally not have access to the credit market like people with low FICO scores. The most popular type of subprime loan is an adjustable rate mortgage or ARM. In an ARM, the initial interest rate is usually low but then adjusts after a period of time to above the prime rate. The low interest rate is usually locked in for anywhere from 2-5 years and can be as low as 2.5%. After the lock in period, the rate adjusts and can be as high as 10%. An ARM is a good option for borrowers who know they will have the credit to refinance to a traditional loan after the adjustable period or for borrowers who only intend to live in the home for a short period and sell the property before the rate adjusts.

Another loan type that is available for subprime borrowers is a bad credit FHA loan. An FHA loan is backed by the Federal Housing Authority and will allow you to borrow about 96.5% of the value of the home you are purchasing. This means that you won’t have to come up with a large sum of money for a down payment. In addition, the government backing means that you will be more likely to qualify, even with less than perfect credit. This is because the government helps secure the loan for the bank in case of default. One important note is that you will pay monthly insurance on your loan. In additional to you principle and interest payments, you will also pay a PMI insurance payment. This is basically extra money you pay to help insure against default. PMI payments can range from $80 to over $200 each month, depending on the amount of the loan. Make sure that you budget for this amount when calculating your monthly payments. Also, this may decrease the overall amount you can qualify for because it increases your monthly payment amount.

Texas Subprime Mortgages and Negative Press

Although a subprime mortgage can be a valuable tool in helping secure a home loan, many borrowers shy away from them due to recent negative press. Specifically, in Texas, many politicians have gone as far as to label subprime mortgages as predatory lending practices. They claim that subprime loans are designed to charge high interest rates for people who cannot afford them. Proponents of subprime mortgage Texas programs claim that subprime loans allow individuals access into the home marker who would otherwise be shut out due to credit history.

In order to protect yourself financially and choose the right Texas subprime mortgage product, find a mortgage broker that you can trust today. Brokers at Level 4 Funding will be there to lend a helping hand to help you navigate the ins and outs of Texas subprime mortgages. Call us today to make your dream to own a home, a reality.