Sub-prime lenders have previously been aggressive in buying less than perfect credit mortgages as home prices were rising.
(Rising home prices help protect the lender if the buyer defaults).
A recent wave of foreclosures in sub prime and a cooling home market has put many of these companies out of business.
Others that remain have significantly tightened credit and down paymentrequirements.
These changes are resulting in an increased use of some more traditional alternatives.
Before the surge in sub prime lending the primary source of mortgages for people with credit problems was FHA, Fannie Mae, and Freddie Mac programs.
Fannie and Freddie have loan programs designed specifically for consumers with blemished credit.
One example is Fannies HomeStay initiative.
The main feature of the HomeStay initiative is the Expanded Approval program.
Customers with less than perfect credit can often get approved on the Fannie Mae Expanded Approval (EA) program.
The finance rate is usually several percent lower than a sub prime loan.
The Expanded Approval program can also be used to refinance out of a high rate loan and get lower payments.
The vast majority of current homeowners with sub prime mortgages will qualify for an EA mortgage if their last 12-month mortgage payment record is clean.
Fixed rate terms are available to eliminate the problems associated with adjustable rate loans.
I would advise anyone with a high rate mortgage to see if this program, or a similar FHA or Freddie Mac plan, can save them money! This HoneStay program may not be right for all consumers.
If you have a current mortgage with multiple payments 30 days late in the last year you probably won't qualify for a refinance.
Fannie Mae programs are also fairly rigid on debt-to-income ratios and some customers won't qualify because of this.
In addition there are competing programs such as Freddie Mac products that may be better in some cases.
I suggest shopping lenders that have a variety of programs available.
A good loan officer should be able to give you information for different programs and help you select the program that is best for your situation.
Another part of the HomeStay initiative is to work with current Fannie Mae customers to help them stay in their homes in the event of problems.
This includes things like free counseling, modifications, long-term forbearance plans, and repayment plans.
Ask your mortgage service provider if you need help.
Texas residents can get more information at Texas Fannie Mae HomeStay .
Or you cancall my office at 281-537-7800 for questions or information.