How to Tell if You Have a Subprime Mortgage

Realizing exactly how to tell if you have a subprime mortgage used to be quite simple. Many times the lender would openly tell you. Now consumers are often left to guess which leaves many confused about the type of loan they have.

 

There are several ways you can tell if you have a subprime mortgage, the determination of whether you have a subprime mortgage is sometimes easy to determine, but at other times, it can be much more difficult to actually determine. If you are fully aware that you have terrible credit then you can be almost guaranteed that you possess a subprime mortgage. However those consumers who have credit that is decent are often shocked to discover that they have a subprime mortgage.

 

Several key issues that should be an immediately red flag would be the presence of an interest rate that is substantially higher than the market average. This means if at the time you obtained your mortgage the typical interest rate that was offered is around a 5% range and instead your mortgage is accompanied by a rate in the 15% range then it should be a very clear indication that you are looking at a subprime mortgage.

 

An addition way how to tell if you have a subprime mortgage is if

you have been permitted to purchase the home with less than 20% for a down payment. While this is not always a surefire method to determine if you have a subprime mortgage it is generally a very good indication that you are considered a credit risk if you are required to purchase mortgage insurance.

 

While the mortgage insurance is generally required for those who get a mortgage for more than 80% of the house financed it is always required for a borrower that is considered subprime.

 

There are two types of mortgages that are extremely popular in recent years that are particularly common for subprime borrowers. The first is a low-doc mortgage where the paperwork required to be approved is substantially less than in a conventional mortgage. The second type of mortgage is the no-doc mortgage where there is no documentation for the loan to be approved.

 

Typically, in these low-doc and no-doc mortgages there is very little if any documentation that pertains to income. This generally is what is used to help people secure a home mortgage that would otherwise have great difficulty proving income in order to receive a good mortgage.

 

It is important to realize if you have a low-doc or a no-doc mortgage you are typically considered subprime due to the fact that the income cannot be fully verified. This may or may not have any reflection at all on your actual credit history. If you have good credit but no documentation to prove your income you are still considered quite risky to a lender, especially following the housing bust that has recently occurred due to the subprime mortgage crisis. As you can see there are several ways to determine if you have a subprime mortgage and ensure that you are fully aware of what your mortgage type is, and how it affects your budget.

Additional Resources:

How do you know if you have subprime mortgage problem?

Subprime Mortgage Loans - Things you should know about subprime mortgage

Subprime Mortgage Lender Guide

Ways to Find Out if You Are Facing Subprime Mortgage   

Re-Finance Your Subprime Mortgage in 6 Easy Steps