Mortgage Blog

When You Need a High Risk Mortgage

By March 1, 2014July 20th, 2021No Comments

In the wake of the collapse of the housing market in 2008 and 2009, banks became a lot more selective about making mortgages. The sheer number of foreclosures, particularly in the subprime market, brought banks to the brink of ruin — and past it, in some cases.

High Risk Mortgage Lenders

This doesn’t mean that you can’t find a high-risk mortgage, though. It just means that you have to know what you are doing to find one. You might be looking to make a quick buy on an investment property, but you don’t have the necessary debt-to-income ratio to satisfy a conventional lender. If you own your own business, it can sometimes be difficult to verify your income to the satisfaction of your high risk mortgage lender. You might be bridging between two houses at the time, which means you already have a mortgage out on one property and can’t settle on the second one yet until the first one goes away. You might have a house on the market but need to move, and you need financing for your second house until the first one sells. You might also be planning to buy a home, fix it up, and flip it to another buyer at a profit, and you don’t have time (or the credit) to wait for a conventional lender. You also might need a second mortgage to pay off collectors, judgments, or owed taxes on the home to avoid a lien being placed on your asset.

High Risk Lenders for Home Loans

Even though there is still a lot of anxiety in the housing market, the amount of high risk mortgage credit available out there to lenders is slowly increasing. While Wells Fargo is one of the few North American major banks to start tiptoeing back into the subprime market; most of the lenders in this niche specialize in subprime loans and are moving on a case-by-case basis to start building some new business. You can take advantage of this possibility if you know what you are doing and how to proceed with a given property.

High Risk Mortgage Loans Borrowers

The first step you need to do to get a High Risk Home Loan is to prepare yourself. In a high-risk mortgage, the primary consideration of the lender is the asset, not your creditworthiness. After all, if you had everything in place (or if time weren’t an issue) you could use a conventional lender. So this means that the property will undergo a thorough appraisal. The government tax records will be a starting point, but the lender may well order another property inspection and go by his own appraisal to determine the value of the property. Because the appraisal may end up differing significantly from the purchase price, you need to be ready to deal with the ramifications. If the appraisal is much higher than the purchase price, that benefits you, because you’re asking for a lot less than what the lender believes the property would sell for. However, if the lender’s appraisal is too low, you may not end up with the financing you wanted.

With this in mind, you need to have legal representation in place. In a best case scenario, all you would need a lawyer for is to go over the paperwork and make sure that everything is in order to protect you in the purchasing process. The lender will have an attorney working on that side, so you need to have your own representation. Amansad Financial can connect you with an experienced real estate attorney in your area who has the necessary experience for this sort of case.

You’ll also want to have a clear chain of custody for your down payment. After all, most people with poor credit don’t have a 30 percent down payment sitting around. If your issue is timing rather than credit, that may not be as important. However, if credit is the issue, you will need to be able to prove where that payment came from, whether it’s a gift from your parents, a bequest, or other source.

Finally, you also want to have an ethical real estate firm with a high level of expertise preparing your documents. Amansad Financial has completed the documentation for scores of transactions just like yours. Every high-risk mortgage is different, and you want to make sure that your paperwork suits your situation and does not cause you a headache down the road.

To learn more about High Risk Mortgage, contact one of the professionals at Amansad Financial, who stands ready to help you purchase that next investment property or get into your new home.

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