There’s plenty of news in the press these days about the subprime market falling out of favor. But how does this affect you if you have a subprime loan?

Many subprime borrowers are having trouble making their payments after their introductory teaser rate period ends. Most subprime loans over the last few years had a two year fixed rate and rates have really gone up over that same time period.

I was looking back at an old rate sheet from two years ago and it amazed me to see how low rates really were. I had forgotten that most people were easily qualifying for rates at or around 5% even with credit scores below 600. The bad news is that those same borrowers, if they do nothing, will have their rates jump as much as 3% when the fixed period on their loans is over. Some people could see their payments nearly double overnight!

At Naviloan, we want to help you avoid a bad situation. Here are the things most subprime borrowers need to know and that can help them avoid getting behind on their mortgage payments or worse, losing their homes to foreclosure.

1st- Know when your fixed rate period ends. Typically two years after you signed the loan but sometimes three or five. Better get those loan docs out!

2nd- Understand your ‘adjustable note rider.’ This will tell you the maximum amount that your interest rate will rise on the first rate change. Again- it can be as high or higher than three percent on many of the subprime loans from a couple years ago!

3rd- Talk to a mortgage professional about your refinancing options. Hopefully, you’ve kept your credit clean since getting that great low rate a couple years back and are ready to move beyond subprime. Ideally, you’ll be able to get a much better loan now than you did before. You did keep those credit card balances down after consolidating your debt, right?

4th- If your rate is already rising- don’t panic, and above all else, don’t fall behind on your mortgage payments. Always make your mortgage payment first, even if you have to fall behind on your credit cards or other debt. Miss a mortgage payment and not only does your credit score go down, but mortgage lenders see your risk go through the roof. They count every ‘mortgage late’ as a very serious hit against you. Too many lates and you may not even qualify for a refi!

That’s the death spiral into default… it begins when you’re not watching and suddenly your payment rises. You miss a payment or two and then your credit goes down. You’ve finally had enough, maybe the payment goes up one more time, and then it’s too late. Because of the missed payments, you can’t qualify for a better loan to save you from this mess.

If you need help figuring out your options, give a Naviloan mortgage expert a call. We can help you figure out your payment changes and see if you qualify to get into a safer loan.

go to www.naviloan.com for more information or click below and we’ll call you now

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