You will never win if you never begin.
— Helen Rowland

LET’S GET CREATIVE!  WE’RE ON TO PART 3 OF ‘THE 4 MOST WIDELY USED MORTGAGE PROGRAMS FOR BUYING A HOME’.  THE QUESTION REMAINS “WHAT IF WE DON’T FIT INTO A CONVENTIONAL OR GOVERNMENT MORTGAGE?”  MANY FOLKS AT THIS POINT JUST GIVE UP.  BUT TAKE HEART, THERE’S STILL HOPE! enter the 'alternative/non-prime' mortgage...

The first thing we want to tell you is don’t judge the book by the cover.  Sometimes people think the title ‘Alternative/Non-Prime’ automatically equates to a bad deal.  That’s just not true.  Having said that, you also can’t go into this option thinking you’re going to get best terms on the planet.  You have to think in terms of good, better, best and the Alternative/Non-Prime option is a ‘good’ one; maybe not the best.  Even so, it’s really about perspective.  If there’s only one boat that gets you to the dock, then indeed it IS the best boat!  The whole point in even looking at this loan is because you have a greater-than-average weakness in one or more of the Five C’s of Lending:  Character (or Credit), Capacity, Collateral, Capital, and Conditions.  If you want to know more about the Five C’s click here.   Your making a trade in that you’re asking the lender to take more risk due to weakness(es) that you may have in these areas.  So what is it that you must give in return?  In simple terms, it’s a little more skin in the game in one way or another.  In keeping with the structure of our previous posts, we’ll finish this out by simply outlining the qualities of this mortgage.

MORTGAGE PROGRAM #3:  THE ALTERNATIVE/NON-PRIME MORTGAGE

An ‘Alternative/Non-Prime’ mortgage is broadly defined as a mortgage that possesses the following qualities:

  • Allows for challenges with income documentation, especially for Self-Employed

  • Down payment requirements that range widely from as little as 10% on up to 40%

  • Does NOT require mortgage insurance!  ** This is a huge factor in considering that even though interest rates may higher, the elimination of mortgage insurance levels the playing field **

  • Generally quite liberal in considering past Bankruptcy, Foreclosure and Short Sale

  • Generally quite liberal in considering low credit scores

  • Generally limits the mortgage payment plus your current monthly consumer debt to 50% or less of your gross monthly income.  Some exceptions are granted

  • Generally more lenient with delinquencies (lender willing to take more risks)

  • Generally no “Red Tape”

  • Generally does NOT require that taxes and insurance be included in your monthly payment

Before wrapping this post up, I’d like to put the spotlight on what I consider to be one of the most beneficial aspects of this loan.  That is the ability to provide solutions for self-employed borrowers or those that legally take advantage of significant income tax deductions due to the nature of their business.  Solutions available include using bank statement deposits (personal and/or business) and other methods of ‘stated’ income.  There’s no doubt that Self-Employed borrowers are underserved when it comes to qualifying for home-financing and we’re always looking for ways to help.  The Alternative/Non-Prime avenue is a great option!

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