Updated January, 2017
Many mortgage “experts” thought that subprime mortgages would never make a comeback after the housing crash because the crash was thought to be caused by “too many subprime loans”.
But starting in 2013, the subprime mortgage market is starting to come back and many subprime lenders are starting to offer people subprime mortgages again. The 2013 numbers increased in 2014, 2015 and 2016 – because lenders are finding that many people who went through a foreclosure or short sale are really a good credit risk – and are willing to pay more for a subprime mortgage just to get financing for the house they want to buy while housing is affordable.
In 2016, lenders are coming back and offering different types of non-qualified mortgage programs (more on that below) and many of these non-qualified mortgage programs are designed to serve those people who could be considered “subprime” borrowers.
Lenders are starting to offer subprime mortgage loans and even the press is starting to notice. The LA Times ran a story about a couple who had a foreclosure got a subprime loan from a lender above a 10% interest rate and was happy about it. Just think – how many other people who have recently been through a foreclosure or short sale would be happy about getting a loan right after it? This particular couple viewed it as a “bridge loan” – which can make a lot of sense in a rising real estate market.
Michele and Russell Poland’s credit was shot, but they managed to buy their suburban dream home anyway.
After a business bankruptcy and a home foreclosure, they turned to a rare option in this era of tightfisted banking — a subprime loan.
The Polands paid nearly $10,000 in upfront fees for the privilege of securing a mortgage at 10.9% interest. And they had to raid their retirement account for a 35% down payment.
Most borrowers would balk at such stiff terms. But with prices rising, the Polands wanted to snag a four-bedroom home in Temecula near top-rated schools for their 5-year-old son. By later this year, they figure, they’ll be able to refinance into a standard loan.
“The mortgage is a bridge loan,” said Russ Poland, now working as an insurance investigator. “It was expensive, but we think it’s worth it.”
In the aftermath of the housing crash, there’s no shortage of Americans who, like the Polands, are eager to rebuild their shattered finances. In response, lenders are emerging to offer the classic subprime trade-off: high-priced loans for high-risk customers.
Before the housing crash, many people would get subprime loans and think nothing of it. Then the housing crash happened and it was blamed on the “bad, bad subprime loans” – which may or may not have been the primary reason for it.
Before the housing bust, a sprawling business arose in subprime mortgages and their cousins, so-called alt-A loans, which were issued to people who had decent credit but did not have to prove income. About $1 trillion in subprime and alt-A loans were originated in 2005 and again in 2006 — more than a third of all home loans, according to the trade publication Inside Mortgage Finance.
But the explosion of mortgage defaults that began in late 2006 vaporized an entire industry of subprime specialists. The Wall Street firms that had bundled the loans into securities soon began to implode as well. Little wonder that loans for the credit-challenged disappeared.
Today’s high-risk lenders differ from those during the housing boom in key ways. These lenders say the new subprime mortgages are actually old school — the kind of loans made in the 1980s and 1990s. In other words, a borrower’s collateral matters, down payments matter, income and ability to pay matter.
If you are in a situation where you have gone through a foreclosure or short sale or bankruptcy and are having trouble getting a “standard” loan – maybe it is time to look into getting a subprime loan again – lenders are offering them at reasonable terms and if you have the ability to repay it (good job, stable history, big down payment, etc.) then it may make a lot of sense.
Subprime in 2017: This Time It’s Different?
Subprime lenders today are different than the subprime lenders in the past – because of new regulations that came as a result of the meltdown. Even though today’s subprime mortgages are what are considered “nonqualified mortgages” and don’t fall under the QM safe harbor rules, they do have rules that didn’t exist before – called the Ability to Repay rules.
The “old” subprime loans had no ability to repay rules – and so many people believe that today’s subprime loans are “safer” than in the past.
Subprime Mortgage Programs in 2017
There is a different type of subprime mortgage in 2017 and back in 2016 than there was in the early 2000’s – and the programs will vary by lender. It used to be that there were certain types of subprime programs such as stated income, NINA, NINJA, SIVA, etc and largely those programs no longer exist from a variety of lenders. The reason is that many lenders now have “nonqualified mortgage programs” which means they are not “qualified mortgage” programs that can be bought up and sold to Fannie Mae and Freddie Mac.
Nonqualified mortgage programs can be considered the new subprime – depending on the lender and the program. Lenders who offer non-qualified mortgage programs will portfolio lend – which means they will lend the money and then just hold onto the loan and keep it in their portfolio rather than sell it off on the secondary mortgage market.
Some lenders may have a non-qualified stated income loan program, some may have an NINA loan program and some may have an SIVA loan program. But the only way to know for sure what loan programs are available at a lender is to shop the lenders and see what they have available. And if one lender tells you that they don’t have a stated income loan program, that doesn’t mean one doesn’t exist – it just means that the particular lender doesn’t offer one. Yes, it is a different mortgage world in 2017 than it was in 2007.
Subprime Mortgage Lenders – 2017 Updated List
Here is an updated list of lenders who are doing non-qualified mortgage loans – which are considered to be “sub-prime” in 2015. We update this list as we get more information, and it certainly does not include every lender who offers subprime loans – but it does give you a place to start if you are looking for a subprime loan.
Or you could just click here and get matched with a lender.
- AmeriHome Mortgage – Updated January, 2017
- Bank of America – Updated January, 2017
- Caliber Home Loans – Updated January, 2017
- Citadel Servicing – Updated January, 2017
- Impac – Updated January, 2017
- JMAC – Accessed January, 2017
- New Penn Financial – Updated January, 2017
- North Coast Financial– Updated January, 2017
- On Q Financial – Updated January, 2017
- SoFi – Updated January, 2017
- Wells Fargo – Updated January, 2017
Stated Income Lenders – 2017 Updated List
Here is a list of lenders who are offering stated income loan programs – or at least according to our best information they are.
- Angel Oak Home Loans – Updated January, 2017
- Athas Capital – Updated January, 2017
- American Financial Network – Updated January, 2017
- Caliber Home Loans – Updated January, 2017
- Citadel Servicing – Updated January, 2017
- Homewood / Mike Clover – Updated January, 2017
Impac Mortgage – Updated January, 2017
Nationwide – Updated January, 2017
New Penn Financial – Updated January, 2017
North Coast Financial – Updated January, 2017
OnQ Financial – Updated January, 2017
QK Mortgage – Updated January, 2017
RPM Mortgage – Updated January, 2017
SoFi – Updated January, 2017
Synergy One – Updated January, 2017
Frequently Asked Questions
Here is a list of frequently asked questions that people ask me about subprime loans. We will continue to update this list, so if you don’t see an answer here – check back! We keep updating this as we get more questions.
I am interested in a stated income loan – is it possible to be declined if I state my income too high?
It is true that some lenders are offering stated income loans again, so as interest in this type of loan rises, we find more questions about them. The answer to this is – yes, it is possible to have your loan declined for the reason that your stated income doesn’t match your job description and title. If you are a waitress that declares you make 50,000 per month, that may be an example where an Underwriter would look twice at your file. Underwriters have resources to see the range of pay based on title and job description – and while not always accurate, they are typically in the ballpark.
Each lender will have a different set of rules about this (or *could* have a different set of rules) and so be sure to be open, honest and truthful with your lender at all times.
Some lenders may require that you fill out a form (IRS Form 4506), which allows the lender to request IRS verification of your tax returns for the previous two years.
Do subprime loans have a minimum credit score?
Most loan programs – subprime or not – usually have a minimum credit score. So, yes – I will answer “yes” to this question. That said, each lender usually has multiple programs and so you will want to ask the lender about the specific program. It is possible that there is not a required minimum credit score – but it is far more common for each loan program to have a stated minimum credit score. The minimums will vary by lender and program.
Do subprime loans require a minimum down payment?
Much like minimum credit scores – the most common answer is “yes”. Not always, but usually lenders will have a minimum down payment – which will vary by lender and program. The general rule of thumb with any type of subprime / Alt-A type of loan program – it will require a higher down payment than conventional loans – but it will vary by lender.
Find A Subprime Mortgage Lender
Finding a subprime mortgage lender in 2016 is easy – you can start right here. We have a network of some of the best subprime mortgage lenders who can help you get qualified for a mortgage loan that is right for you. Here are a couple of lists of lenders: one for nonqualified mortgages and one for stated income loans. If you want to make it easy, start here and get a subprime mortgage quote that is free, easy and only takes a few minutes to get matched with a great lender.