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Loans for Challenged Credit – The Subprime Market

What is happening in the Subprime market and why which may affect your ability to buy or refinance your home?
It’s important first to know that the Subprime market evolved in order to offer loan programs to the public that had challenged credit.  Lenders also referred to it as second chance financing where requirements to secure a loan is less stringent than traditional lending.  Loans falling under the Subprime heading are riskier and have a higher chance of default. 

First let’s talk about What Is happening in the subprime market?  Nevada being Number 1 in foreclosure rates, has brought enough attention to itself mainly due to high investor saturation and a high volume of subprime lending with 100% financing to go with it.  Property foreclosures have continued to escalate forcing subprime lenders to tighten their less stringent guidelines.  Many of them have faced shutting their doors all together. 

Obtaining 100% financing for a borrower that wanted to purchase a home with challenged credit including bankruptcies, collections or judgments was normal.  Now, 100% financing is near gone for anyone under a 660-680 mid credit score.  Lenders are currently requiring anywhere from 5-10% down for purchase transactions.  The required minimum credit scores have increased and more importantly the stated programs for W-2 wage earners are scarce.

You ask, “OK, what do I have to do now to purchase a home or refinance in today’s market when I have challenged credit?” 

The first and foremost important thing is to improve your middle credit score if you have not done so already.  This is true for both purchases and refinances.  Credit repair specialists can do some adjustments to credit reports for favorable results.  Also, paying down any revolving credit card accounts will improve your score fairly quickly.  I would suggest speaking to a mortgage professional or a credit repair specialists before paying anything off or down - especially collections!!!  There are several complicating factors that makeup the credit score & more times than not, people can hurt the score rather than help it without good advice.   

If you wish to be recommended to a credit repair specialist,

Contact me, Casey Moseman, for more information


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