- Prime Loans. Prime loans are available for people with excellent credit. Prime loans offer the most competitive interest rates.
- Alt A Loans. This type of loan is made available to people with less-than-perfect credit histories. A non-prime Alt A loan simply means that the borrower’s credit record is not considered to be A+ or "prime." A non-prime borrower may also be categorized this way because of the size of the requested loan or due to other characteristics, such as being self-employed or financing a non-conforming property.
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Non-prime Loans. Non-prime loans are available for people with blemished credit or no credit at all. These loans allow people to get credit that they would otherwise be unable to access. These loans have higher rates than prime loans. How much higher depends on things like your credit score, size of down payment, and the severity of the credit blemishes.
Non-prime mortgage rates are usually higher than prime loans. A $100,000 loan that has an interest rate that is 4 points higher can cost you more than $100,000 over the life of the loan. So, it really pays to take time to repair you credit before getting a loan. You’ll pay nearly twice as much interest on a 30-year sub-prime loan than you would for a 30-year prime loan.
$100,000 Home Paid Over 30 YearsInterest Rate Monthly payment Cost Of Interest 7% $655.30 $139,508 11% $952.32 $242,835 - High Cost Loans. The US Home Ownership Equity Protection Act (HOEPA), part of the Truth in Lending Act, was passed to ensure that certain disclosures were provided to consumers when the annual percentage rate of their loan at time of consummation exceeds by more than 8 percentage points for first-lien loans, or by more than 10 percentage points for subordinate-lien loans, the yield on Treasury securities having comparable periods of maturity to the consumer’s loan maturity. Or, if the total points and fees payable by the consumer at or before loan closing will exceed the greater of 8 percent of the total loan amount, or a flat fee that is adjusted on January 1st of each year and tied to the change in the Consumer Price Index. Terms and conditions that may be acceptable in other loans, such as a balloon payment are not acceptable with this type of mortgage. You must be sure you understand the terms of loans subject to HOEPA disclosures if you decide a loan priced above the noted thresholds is of interest to you.
- Predatory Loans. Predatory lending involves practices that strip equity away from a homeowner. Predatory lenders combine a variety of tactics to coax borrowers into high-rate, high-fee loans.
| There are a lot of products available today. There are products developed for people with good credit, bad credit, and even no credit at all. Loans for people with no or damaged credit are often called either “non-prime” or “sub-prime” mortgages.
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