Learning Center
Basic Finance
How Credit Affects You
Preparing for Home Ownership
Steps for Buying a Home
Life as a Homeowner






 
Additional Resources
  • For more information about affordable loan programs and new home loans including Home Equity and Refinance call
Module 3
Preparing for Home Ownership
Types of Home Loans
line
< PREVIOUS | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | NEXT >

Specialty or “Exotic” Home Loan Products

Borrower BewareThere are more loan choices than ever before in today’s marketplace. With so many options, a growing number of homebuyers are selecting specialty loan products, such as interest-only, negative amortization and payment option ARM loans. These products provide payment choices that can help homebuyers better manage their monthly finances. Borrowers must be aware, however, that specialty home loan products carry certain risks, such as payment shock (when monthly payments increase greatly) and increased debt over time. If you are considering a specialty product, be sure you understand and discuss the program benefits and risks with your home loan consultant.

Non-prime/Subprime Loans

Loans for High Credit Risk BorrowersNon-prime loans are also sometimes referred to as “subprime” or “specialty” loans. When making a loan, a lender’s primary concern is that the loan be paid back on the terms established. In the past, many borrowers with credit issues, higher ratios or a lack of documentation would have simply been denied a loan. Today, thanks to special programs and more flexibility on the part of lenders, a high credit risk borrower may still qualify for a loan — just not on the same terms that someone who presents a much smaller risk to the lender would receive.

How to Repair Your Credit
A non-prime loan is usually offered at a higher rate of interest and may require a higher down payment, points and/or additional fees. Obtaining non-prime financing can help establish an improved credit rating if consistent on-time loan payments are made. A borrower might obtain a non-prime loan with the hopes of making on-time payments that will help repair his or her credit, and then refinance the loan on better terms in the future. For a small increase in the starting interest rate, some non-prime loan products include a rate reduction feature that rewards consistent and timely payments and improved credit worthiness with an automatic reduction in interest rate in the first few years of the loan, without having to refinance.

Be Sure You UnderstandBefore accepting the terms of a non-prime loan, be sure that you fully understand why you are not being offered a prime rate.

< PREVIOUS | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | NEXT >
  Countrywide Home Loans, a division of Countrywide Bank, FSB is an Equal Housing Lender. © 2007 - 2008 Countrywide Financial Corp. Trade/service marks are the property of Countrywide Financial Corp., and/or its subsidiaries. All rights reserved. The content of this website is provided for the convenience of our readers and is for informational purposes only. Readers are encouraged to use the content of this website to supplement their knowledge and to also seek out other reliable sources of information prior to engaging in the home financing and home buying processes. The information featured herein is intended to be accurate and we will make efforts to keep this website updated. However, due to the rapid changes occurring in the programs, products, services offered within the home financing industry, we do not guarantee the accuracy of the information presented. Countrywide is not responsible for the contents of, or products or services offered on, third party Web sites and provides links to such sites solely for your convenience. This is not a commitment to lend. All rights reserved.