The heat is on many mortgage people like myself for putting people in "bad" loans. When I am approached by a customer who wants to be prequalified, I work towards the best case scenerio for my customer. When the customer comes to me with a low credit score, my first response is to coach them into getting a better credit score. Not all Loan Officers are out there like sharks just wanting to make a fast buck.
Many customers when told they need to improve their credit for better terms on their mortgage want to know if they can qualify NOW. In some cases, when the customer really wants a particular home, they can qualify for a sub- prime loan. These loans are mostly considered a "band-aid Loan". It can get the customer into their home that they wouldn't normally qualify for.
These are the loans that have been getting people in trouble. They usually have a 2 year prepayment penalty and are fixed for the two years as well. The idea behind these loans is it gets the customer in the home.After the 2 year period, refinance out of the loan and into a program with better terms. This only works if the customer is serious about paying their mortgage on time and improving their credit. I have done this and it works. Unless..... the customer keeps their bad credit by not paying debts in a timely manner. If this happens they are "stuck" in a loan they don't really want.
As Loan officers we must educate the customer how important their credit is and how to improve it. I realize some of the people are in trouble right now because this wasn't explained to them well by their Lender, but some of the blame lies with the average persons spending habits.
As Professionals, let's take the time to educate our customers, and advise them correctly.
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