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Nonprime lender is a category of lenders that cater to a different tier of borrowers. They provide different kinds of loans to individuals who have blemished credit and those with limited or no credit history.

These lenders present financing opportunities to specific individuals who may not qualify for a prime loan. These funds can be used for mortgage payments, auto loans, and other financial needs.

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Look for the Right Lender Which Suits Your Needs

Whether buying a home or a car, a non-prime loan can help you afford such purchases better. A nonprime lender provides you with a specific loan that does not only provide funding but also help you improved your credit.

Fixed-Rate Lenders

For mortgage, non-prime lenders may offer 30-year fixed-rate loans to qualified borrowers. This means that the loan’s interest rate remains the same for the entirety of the loan term. This makes monthly payments more consistent and predictable, thus allowing borrowers to plan out their finances better.

Adjustable-Rate Lenders

Some lenders may provide loan with interest rates changing throughout the life of the loan. Adjustable-rate mortgages usually have a low initial interest rate for a certain period of time. This creates some leverage for borrowers, enabling them to save more or grow their money in the early portions of the loan.

Lenders – FAQ’s

What is a Mortgage Lender?

A mortgage lender offers a loan that provides money for the purchase of a property or the refinancing of an existing loan. The borrowed money must be paid by the borrower regularly within a specified term and with an agreed interest.

 

While ‘prime borrowers’ find financing through conventional lenders, nonprime lenders offer loans to those who can’t qualify for a prime mortgage loan.

What requirements will lenders ask for when you apply for a mortgage?

Ideally, lenders who originate conventional loans ask for standard employment, income, assets and credit requirements. These will be verified through the documents which the borrower is asked to submit.

 

These may include:

  • Social Security Number
  • The last two months of pay slips
  • The most recent two years of salary and tax information reflected in a W-2 form
  • Bank statements for savings and other personal accounts
  • Federal tax return
  • Credit information

 

However, not all borrowers can provide these documents. Fortunately, lenders specializing in non-prime loans cater to individuals who lack some documents or may have some issues in meeting the requirements.

What is a credit score?

A credit score is a number-scoring system which reflects an individual’s credit history. It helps the lenders determine a borrower’s  risk level and ability to repay a loan. This is determined by various national credit bureaus.

What is an escrow?

It is basically  a ‘trust’ that is kept by a third party. It makes sure that everyone gets paid of what they’re owed. The third party representative will hold on to this account while the buyer and seller work on the loan details.

How much down payment is needed for a nonprime mortgage loan?

For nonprime loans, a 20 percent down payment is very common. There are, however, some government-backed loans that may require as little as 3.5 percent down payment.

 

For non-prime mortgage loans, the minimum down payment varies per lender and loan type. Usually, it is higher than that of a conventional loan. This is to compensate with the riskiness of the borrower. It is highly advised that a borrower shops for different nonprime lenders because down payment requirements vary.

What is Refinancing?

This means that a borrower gets a new loan to replace an existing mortgage loan. Usually, the purpose of refinancing an existing loan is to lower the interest rate.

What is a foreclosure?

A foreclosure occurs when a bank or a lender takes the property to their possession from a borrower who has failed to continue making payments towards the loan.

Lenders Articles

Read informative articles that are relevant to industry of subprime lenders. Be informed about the latest industry updates and get tips on how you can qualify for a subprime loan.

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