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Conforming or Non-Conforming loans??

By
Mortgage and Lending with Independent

Subprime Loans

 

The Myth: 

So theres a myth going around that borrowers who qualify for prime loans only end up with subprime loans if lenders deceptively steer them into such loans.

The Truth:

Many borrowers who might qualify for prime loans knowingly select subprime loans for reasons that include:

  • A loan to put little or no money down. I always still recommend the government loans which require little money down anyways but for the Jumbo limits and consumers who want to pay zilch, there are the alternative loan options.
  • Documentation Purposes to speed up or not disclose to the lender.  Again its the consumer choice they have choice A) secured government loan with a great rate where we need x,y,z documentation and close on x date....or choice B) no doc loan with a higher rate...where we need NO documentation and close faster.  Its like buying a T.V now with the highest msrp and no interest in 6 years or waiting 2 weeks later to buy it on sale without having the no interest promotion.
  • And of course taking a higher loan amount than the restricted prime limits.  Recently FHA limits went up but there are still consumers out there who need a higher loan than the FHA limit. So many borrowers again will take a hit on a subprime loan in order to get what they want.

Bottom line there are choices out there and know what they are, make a educated decision on whats the best loan for you. 

This blog is based on the Myth Article located on the Mortgage Bankers Association website http://www.mortgagebankers.org 

I always give my borrowers which choices they have and what are the pro's and con's for each loan type.  I will walk you through the whole loan process so you will never be left in the dark.  Call me to get a free mortgage analysis

Todd Clark - Retired
eXp Realty LLC - Tigard, OR
Principle Broker Oregon

You are right that a lot of people who took subprime loans choice to take that type of loan for whatever reason, but I have to say, if we educate them and they still choose to go that way, maybe we should have them sign waivers. I see there are going to be more and more lawsuits in the future blaming us for them not knowing what they are signing.

Mar 09, 2008 08:44 AM