Tuesday, April 03, 2007

Foreclosures Force New Charges for Buyers

As foreclosure rates are increasing because of the subprime mortgage meltdown, first time borrowers can face new charges. The new charges, which can include an additional 1-2.5 percent on interest rates, affect 100% loans only for those whose credit score is under 700. Tom Halfpap, a branch manager at National City Bank, warns that if realtors have customers who are already approved for 100% loans, they must check to make sure that the loan can still be done, and if so, the interest rate needs to be locked immediately.

Subprime mortgages, loans given to buyers with risky credit histories, have lead to sky-high amounts of foreclosures across the country. Not only are these foreclosures flooding the market, which creates massive competition for sellers, but now it is affecting the loans which buyers can procure. Loan companies seem to be less willing to risk lending to buyers with 100% loans, and therefore are adding additional costs to said mortgages.

I would like to take this time to reiterate that if you personally have a subprime mortgage, refinancing is an important step to take in order to avoid the sharp increase in payments once the interest rates of your loan changes. Avoid the risk of foreclosure; lock into a 30 year-fixed mortgage rate, if possible.

1 comment:

Cherie said...

Interesting to know.