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Subprime Mortgage Lenders

Are Subprime Mortgages Still Available in 2018?
Home Loans for Borrowers with Less than Perfect Credit.

Today’s Version of Subprime Mortgages

This page has been updated to direct visitors to other mortgage lenders that accommodate to non-prime mortgage borrowers.  We currently are only accepting applicants with credit scores over 620.  If your credit is below a 620, or if you are self-employed, we encourage you to review a list of non-prime mortgage lenders that may be better suited to help you get a mortgage.

If your credit score is above a 620, please consider some loan programs that we offer, such as FHA and USDA loans.

The subprime mortgage crisis has passed and home loans are once again being made available to those who were left out just a few years ago.  The credit freeze is subsiding and capital is becoming available to prospective home buyers with credit scores below a 580 (which is generally considered to be poor credit).  Today’s version of subprime mortgage loans are known as non-prime mortgages, or non-qm loans.

Subprime Lending Today (Updated for 2019)

What is considered a “subprime mortgage” today is not technically the same mortgage product as it was in the early 2000’s.  What exists today is largely FHA loan products, as well as special VA and USDA loans, which are more limited in who they are available to.  Anyone can apply for a FHA loan, whereas only veterans can get a VA loan, and USDA loans are exclusively available for rural properties and for those who make less than the income limits allow.

Being that the FHA offers the best home loans or those with fair credit or bad credit, we mostly discuss FHA loans for today’s version of subprime borrowers.  The FHA technically allows all the way down to a 500 score with a 10% down payment, or a 580 score for a 3.5% down payment.  We personally have a 620 credit score requirement.  There is absolutely no exceptions.  If your credit score falls between a 500-620, you may want to seek out FHA approved lenders in your area.  The rest of the information on this page is relevant to you if you want to learn more about FHA loans for poor/average credit.

FHA Subprime Loan Requirements

FHA loans are what would be considered the subprime mortgages of today in 2018.  Some FHA subprime mortgage lenders go down as far as a 500.  However, most seem to want a 580, which then qualifies you for a 3.5% down payment.  We require a 580+ as we cater to mid range credit scores.  Regardless of the lender you choose, all other non-credit score requirements remain the same.  You can view more in depth FHA requirements here, or you can view the basic guidelines outlined below:

  • Credit – As mentioned above, the credit score requirements depend mostly on the lenders individual credit requirements.  Our guidelines require a 620 credit score.  FHA loans also require that you have 3 trade-lines (such as credit cards, auto loans, or other credit reported debts) that are in good standing.
  • Employment – Any FHA loan will require that you prove at least 2 years of employment history.  It is acceptable to have changed jobs, but you must show consistency in employment and type of work.
  • DTI – The maximum debt-to-income ratio for FHA loans is 45% (mortgage payment + all other reported debts).  This means that your total monthly debts must not exceed 45% of your monthly income.  There is also a maximum mortgage debt-to-income ratio requirement that states your new mortgage payment must not be higher than 31% of your monthly income.
  • No Bankruptcies or Foreclosures – You must wait at least 2 years after a bankruptcy or foreclosure to get a FHA loan.  There are some exceptions to this rule, such as extenuating circumstances such as a job loss that was out of your control.
  • Mortgage Insurance – FHA loans have two types of mortgage insurance, which you can calculate the amount based on your loan amount using this FHA calculator.

Important Things to Consider

We recommend carefully consider a few points regarding home ownership, which is especially applicable for first time home buyers.

  • Timing – Just because you can buy a home doesn’t mean you should buy a home.  It is important to leave “below your means”, and to only purchase a home if you feel confident that you can comfortable make the payments and keep up with the cost of home ownership.
  • Reserves / Emergency Fund – Perhaps waiting until have you have at least a few months reserves would be a wise choice.  Although it is not a requirement to show savings for a FHA loan, it would be wise in the event of an unfortunate job loss, emergency home repairs, or other unexpected financial burden.
  • Cost of Repairs – Home ownership tends to be more costly than some home buyers expect.  This is especially the case for a first time home buyer, who may not be familiar with typical costs associated with home ownership.  For instance, a heater, pipe, or garbage disposal could break causing emergency repairs needed.  These sort of unforeseen costs can add up each year, so be sure and carefully consider how much disposable income you will need to live comfortable once owning a home.

All home loans require that you live below a certain level of monthly debt obligations compared to your income.  This is called your debt-to-income ratio, or DTI ratio for short.  For FHA loans, the maximum amount that your mortgage payment can be is 29% of your income.  The second ratio looked at is the total percentage all your monthly debts are compared to your monthly income.  The maximum amount allowed is 43%.

Frequently Asked Questions:

What states are subprime mortgages available in?
Subprime mortgages as they are known today are different, but home loans for lower credit borrowers are available nationwide. We personally offer FHA, VA, and USDA loans for applicants with a 620 or higher credit score in the following states:

What is the highest percentage loan-to-value available?
Today’s version of subprime mortgage loans offer down payment options as low as 3.5% with a FHA loan.  If you wish to buy a home in a rural area or eligible area outside of a city, you may qualify for a no down payment USDA loan.  USDA loans are only available in designated rural areas, and for households whose collective income is lower than the maximum limits.

What states are subprime mortgages available in?
Subprime mortgages as they are known today are different, but home loans for lower credit borrowers are available nationwide. We personally offer FHA, VA, and USDA loans for applicants with a 620 or higher credit score in the following states:

Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Florida, Georgia, Kansas, Louisiana, Iowa, Illinois, Indiana, Maryland, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin, and Wyoming.

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Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Florida, Georgia, Kansas, Louisiana, Iowa, Illinois, Indiana, Maryland, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin, and Wyoming.