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Subprime Mortgages

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Subprime Mortgage

Are you a home buyer with poor credit, struggling to qualify for mortgage loan? Subprime mortgage offers affordable home financing to people with credit challenges like recent short sale, foreclosure, bankruptcy or low credit score. For investment properties, please review our No Income Verification program.

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Are you a potential homebuyer with poor credit struggling to qualify for mortgage loan? Subprime mortgage loans are making a comeback and more lenders are offering affordable home loans to people with credit challenges like short sale or foreclosure. Here are several tips you need to know if you’re in the market for a subprime mortgage to purchase or refinance your home.

What Are Subprime Mortgage Loans?

There was a time when subprime lending referred to high risk, adjustable rates loans that lead to millions of foreclosures when the housing bubble burst. Often seen as predatory, these used to be the only option for borrowers with poor credit. Today there are exciting new loan options available from boutique lenders for people with low credit scores that feature affordable rates and fees. 

Portfolio lenders set their own guidelines for approval, so even if you had a recent short sale or foreclosure you can be approved without waiting a year. There are programs available that offer loans in excess of one million dollars for credit scores as low as 500. You can be approved to up to 85 percent loan to value and get affordable interest rates in the five percent range. 

If you are self employed there are bank statement programs available that base approval on 12 months worth of personal or business bank statements for loans up to 2 million dollars with credit scores as low as 620. These loans offer flexible rates including 5/1 ARMs to help with your cashless or 30-year fixed rates for peace of mind. 

There are even new portfolio programs geared towards investors that maximize cash flow without needing personal income to qualify. Approval is based on the income produced by the properties you own and programs exist for credit scores as low as 660 allowing you to borrow up to one million dollars.

Foreign nationals seeking financing to buy real estate used to have few if any options available beyond seller financing. Today boutique lenders offer programs for foreign nationals that do not require a US credit score, allow up to 75 percent LTV, and feature flexible debt to income ratios.

If you’re in the market for subprime lending you have options available and rates and fees vary by lender and your financial situation. If you’re a real estate investor with an income-producing portfolio you can qualify for subprime loans based on your portfolio. 

If you are self employed and willing to do the legwork and shop around, it is possible to find smaller portfolio lenders that offer bank statement programs for borrowers with credit scores in the 600 range. These lenders offer non-conforming loans, those that do not “conform” to guidelines set by Fannie Mae and Freddie Mac. These loans often referred to as “portfolio loans” because they are not sold as securities on the secondary market.

Because small subprime lenders do not follow government guidelines unlike banks, they have more flexibility in their programs to allow up to 90% LTV, higher debt-to-income ratios, non-warrantable condos and the use of gift funds to qualify. 

The Benefits of Subprime Lending

If you’re struggling to rebuild your credit score, the higher cost of working with a subprime lender can be worth it, especially if your credit was damaged from foreclosure when the housing bubble burst. Subprime home loans are no longer the loan of “last resort” when Fannie Mae and Freddie Mac have overlooked millions of Americans with credit challenges. 

Today’s options for poor credit home loans are much more abundant than in past years. Careful comparison shopping can help you find the right program for your financing needs with affordable interest rates and fees.

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