A subprime loan application typically means that the borrower has less than optimal credit, but that does not mean that getting a loan is impossible. With the right steps, even people with less than perfect credit can get a mortgage loan today. Lenders are beginning to ease up on their tight restrictions in order to boost the housing industry and help potential borrowers become homeowners rather than renters. Offering a subprime loan means that the lender will more than likely have to keep the loan on its own books, but many lenders are looking to branch off and enhance their portfolio, which is why they offer them. Before you apply for this type of loan, learn how to get your application approved.
Make your Payments on Time
Your credit score might be lower because you had missed or late payments in the past. The key word there is “past”. You need to no longer be making those payments late – everything should be brought current. You can then show potential mortgage lenders that you are able to turn your financial life around and that you can make your payments on time. It is always a good idea to gather the proof that each account that was once late is now current because the credit bureaus are not always up to date on what is paid on time and what is not – it might take a few months for everything to catch up. If you want to apply for a subprime loan now, you will have to manually provide the proof.
Reserves speak for themselves when you apply for a loan. The more liquid assets you have handy, the more likely it is that you will get an approval. The lender needs to see that you have the ability to continue to make your mortgage payments even if something were to go wrong with your job or unexpected expenses were to pop up. Most subprime lenders require at least 3 months’ worth of reserves on hand, but some require more than that. You will have to check with each lender to see their requirements in order to determine if it is worth filling out a subprime loan application with them.
Lenders will want explanations for any wrongdoing that has occurred in your financial past. If you have a bankruptcy, the lender will need to know the circumstances surrounding it. The same is true for foreclosures, short sales, or just late payments. The lender needs to be able to put the pieces together. For example, if you lost your job because your company closed and it then became difficult to pay your bills, the lender can understand and accept this. The same is true if you had an illness or sudden injury that made it impossible to work. On the other hand, if nothing negative happened to you, yet you filed for bankruptcy or stopped paying your bills, the lender will not be able to accept your reasoning. This is why you need to have written and signed explanations for your negative financial past.
Overall, lenders just want to know that you have turned your life around financially. You need to show financially responsibility and remorse for what occurred in the past. They need to see that the things that happened are not habits, but rather just unfortunate circumstances that are in your past and are not intended to return. With the right proof and right answers, you can get your subprime loan application approved and be on your way to becoming a homeowner.