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Non-Prime (Subprime) Lending is Back Again!

January 5, 2015

Denied by the Big Banks?  Need Creative Financing?  PMC Can Help!

PMC NonPrime

Second chance financing (also referred to as Non-Prime, Sub-Prime and Alt-A financing) is available to those that had a difficult time paying their bills on time that had unfortunately injured their credit scores; possibly due to lay off, close of business, divorce or even medical issues. This may have also caused a bankruptcy, foreclosure, short sale, deed in lieu of foreclosure or loan modification. Conventional loans require the borrower be 4 years out from a recorded bankruptcy and Government loans require 2 years to have passed.  Conventional loans require 7 years from the transfer recording of a foreclosure and Government loans require 3 years to have passed.  There are many portfolio lenders that have programs to help those refinance or purchase a home with higher rates and fees after 2 year from a bankruptcy and foreclosure and 1 year from short sale or loan modification.  Their programs are usually 5 and 7 year fixed adjustable rate mortgages with just an underwriting fee.  They normally require the property taxes and hazard insurance to be impounded.  Other portfolio lenders may offer 1 day out of a housing event, but a larger down payment will be required and the interest rate may not be favorable.  Their programs are definitely better than obtaining a hard money loan, which typically has rates starting at 10% and as high as 15%.  Hard money loans usually have pre-payment penalties of 6 months or more. Hard money loans are best fit for rehab homes (require renovation for resale based on average market value) or real estate investors that will make a substantial investment by flipping the property.  Portfolio programs are meant to be short term loans until the waiting period has passed and the borrower can qualify for conventional or government loans.  Many of these programs do not have a pre-payment penalty.

Another reason for obtaining a second change financing loan is due to the lack of income reporting on personal or business tax returns, which is needed to qualify for traditional financing.  Jumbo loans typically require a 43% debt to income ratio (DTI), rate and term financing is under 50% and cash out refinances requires 45% or less.  There are low doc programs that only require bank statements, profit & loss/balance sheet (signed by borrower or CPA), comfort letter by a licensed or certified CPA or tax Preparer, income statement, rent roll and reserves.  These programs can require 6 months of PITIA (full housing payment) for each property owned and some may require 36 months of reserves for the subject property.

Every borrower’s situation is unique. With the proper review of the borrower’s personal documentation, by a licensed NMLS mortgage loan originator (MLO), a program can be found depending on the borrower’s needs.  There is usually a solution or the MLO can prepare the borrower in advance to help them with a loan in the near future.

PMC offers free credit enhancement prior to submitting your loan to the bank to ensure you get the best rate possible.  Even 20 points could be .25% better in rate, which equals thousands of dollars on the life of a mortgage loan.  If you have a loan scenario email us at – PMC Can Help!

Need Expert Loan Advice?  Email your scenario.

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