Wednesday, May 30, 2007

Put Down the Subprime Mortgage Application and Back Away Slowly

Author: Nick
Category: Money
Topics: , ,

stop in the name of basic human intelligence

Are you itching to buy a home but think the best you can do is an 8.75%, 5-year variable ARM with 3 points and a kick in the face? Chances are you just aren’t looking hard enough, says some guy whose job it is to stick poor suckers with ridiculous mortgage loans. Here are some startling–no, shocking numbers on how many well-qualified dummies are saddling themselves with subprime loans:

  • What is the difference between a prime 6.00% and a filthy 9.00% $300,000 mortgage payment? $600 every month, or more than $200,000 on a 30-year mortgage.
  • Fannie Mae says half of subprime borrowers can find a prime loan instead.
  • Over 30 percent of homebuyers let their real estate agent find their loan for them.
  • How many subprime but prime-qualified borrowers could have saved thousands and thousands of dollars if they weren’t lazy and dove into the homebuying process without knowing a thing about it? All of them.

So what about that other half of sub-prime borrowers who are truly subprime? Maybe they should spend a few months fixing their credit before making the largest purchases of their lives at a trashy interest rate. Then they can come back, carefully explore their mortgage loan options, and save a stupendous amount of money.

Besides, the subprime label usually indicates someone who

  • isn’t the best at handling money,
  • doesn’t have a decent down payment, and
  • can’t afford to pay an extra 25% on their monthly mortgage bill.

In other words, subprime borrower should be synonymous for “person who has no business taking out a six-figure loan.”

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