I have never quite understood all of the different loan options available to people when getting a mortgage. Before I bought my first house, I had never really thought about it and always assumed that everyone had the same kind of loan. I could not believe it when a friend of mine gave me hundreds of pamphlets and websites to look at in order to decide what kind of loan I wanted. I have managed to narrow it down a little bit; to three loan categories that most people appear to be using. They are prime loans, Alt-A loans and Sub-loans. If you are anything like me and confused with all of the available options, I may be able to help you out a little. Although there is a major market crisis at the moment, it does not hurt to know what is on offer.
These type of loans came about by the documentation and credit standards established by the two Government Sponsored Entities, Fannie Mae and Freddie Mac. These loans are considered to be prime as they meet the standards of these two government bodies. Sub-prime lenders base their rates and fees on the same factors as prime lenders. This typically means that the lower your credit score, the higher the rates are going to be and the smaller the down payment. Someone who cannot qualify for a prime loan may decide to go for a sub- loan instead.
You may have heard of B-paper, near-prime or second chance loans, and these are all kinds of sub- loans. The term sub-prime refers to loans that do not meet Fannie Mae or Freddie Mac guidelines and can be risky for both borrowers and lenders. Sub-prime applicants may have poor credit ratings and thus the fees and rates are higher to cover the greater risk. A sub- loan is also offered at a rate that is higher than A-paper loans due to this perceived risk. A-paper loans are typically for borrowers with good credit scores of 620 or higher but may not meet all of the standards established by Fannie Mae and Freddie Mac. The borrower debt-to-income ratio and loan-to-value ratios may be higher than that which the GSE's allow. A-paper loans are perceived as being riskier than prime loans and less risky than sub-loans, and fall between the two categories.
Excluding credit ratings, GSE standards can also be quite strict with regards to borrowing money against your home, the purpose of the loan and the property type. If you are a single person looking at buying a five bedroom home, they may not be too lenient. Many people apply for a prime loan to start with, and may not conform to one of the lending factors and thus decide on an A-paper loan or a sub-loan. Your credit rating is one of the main deciding factors to what loan you will be able to get. Many lenders offer all types of loan, so they will be able to talk you through the options and help you come to a decision.
If you are buying a home in Sacramento, Roseville, Folsom or Auburn area, contact Eclipse Real Estate. They are focused on helping sellers, buyers and investors on meeting goals of buying and selling real estate properties. They ensure that the deal takes place in a timely manner and at the best possible price.
Article Source: EzineArticles.com
These type of loans came about by the documentation and credit standards established by the two Government Sponsored Entities, Fannie Mae and Freddie Mac. These loans are considered to be prime as they meet the standards of these two government bodies. Sub-prime lenders base their rates and fees on the same factors as prime lenders. This typically means that the lower your credit score, the higher the rates are going to be and the smaller the down payment. Someone who cannot qualify for a prime loan may decide to go for a sub- loan instead.
You may have heard of B-paper, near-prime or second chance loans, and these are all kinds of sub- loans. The term sub-prime refers to loans that do not meet Fannie Mae or Freddie Mac guidelines and can be risky for both borrowers and lenders. Sub-prime applicants may have poor credit ratings and thus the fees and rates are higher to cover the greater risk. A sub- loan is also offered at a rate that is higher than A-paper loans due to this perceived risk. A-paper loans are typically for borrowers with good credit scores of 620 or higher but may not meet all of the standards established by Fannie Mae and Freddie Mac. The borrower debt-to-income ratio and loan-to-value ratios may be higher than that which the GSE's allow. A-paper loans are perceived as being riskier than prime loans and less risky than sub-loans, and fall between the two categories.
Excluding credit ratings, GSE standards can also be quite strict with regards to borrowing money against your home, the purpose of the loan and the property type. If you are a single person looking at buying a five bedroom home, they may not be too lenient. Many people apply for a prime loan to start with, and may not conform to one of the lending factors and thus decide on an A-paper loan or a sub-loan. Your credit rating is one of the main deciding factors to what loan you will be able to get. Many lenders offer all types of loan, so they will be able to talk you through the options and help you come to a decision.
If you are buying a home in Sacramento, Roseville, Folsom or Auburn area, contact Eclipse Real Estate. They are focused on helping sellers, buyers and investors on meeting goals of buying and selling real estate properties. They ensure that the deal takes place in a timely manner and at the best possible price.
Article Source: EzineArticles.com
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