What should I keep inmind when looking for a subprime loan?

If your own situation requires a subprime loan, the Virginia Housing Development Agency suggests following these ten tips.

1. Ask questions.
2. Shop around.
3. Be an educated consumer.
4. Read before you sign.
5. Avoid balloon payments (a loan that starts with small payments at first, then culminates into one or more significantly large payments).
6. Avoid prepayment penalties.
7. Know your rights.
8. Don’t be afraid to say no.
9. Be prepared—build your credit.
10. Be wary of targeted advertising.

Lastly, if you believe you’ve been victimized by predatory-lending practices, contact the Office of Consumer Affairs in your state to report the problem. You can find a state-by-state list of predatory-lending reporting bureaus at the HUD Web site: www.hud.gov/buying/localpredlend.cfm.

One issue to be aware of when you’re obtaining a mortgage

One issue to be aware of when you’re obtaining a mortgage are either short on cash or dealing with a poor credit rating are subprime loans. Some of these loans have fallen under considerable scrutiny lately because of a practice known as ‘‘predatory lending.’’ Subprime involves lending to borrowers with blemished, less-than-perfect credit or insufficient credit history who typically would not qualify for loans in the conventional prime market. To offset the increased risk, the lender charges higher interest rates on these loans; legitimate subprime lenders have played an important role in allowing access to home ownership (or home improvements) for many consumers who would not have qualified otherwise.

What mortgage programs are available if I don’t have the down payment?

Lenders today offer a variety of flexible mortgage programs. The most basic is the conventional mortgage, which has no security guarantees other than the value of the property. Such loans typically demand either a 20 percent down payment, or a lower amount combined with private mortgage insurance (PMI). Federal Housing Administration (FHA) loans and other programs guaranteed by the government do not require such insurance, which is offered by independent insurance companies to qualified borrowers with down payments of less than 20 percent of a purchase price. The cost of such insurance varies by lender and loan type but generally costs about seven-tenths of 1 percent of the total loan amount annually. There are many other nonconventional options available to home buyers right now. One of the country’s largest lenders, for example, offers the following programs with down payments as low as 3 percent:

• No Money Down Plus Program: Lets all qualified buyers finance the entire purchase price plus up to 3 percent of the closing costs. (No income limits.)
• 3 Percent Solution Program: Gives all qualified buyers the opportunity of putting only 3 percent down on a primary residence and taking advantage of flexible qualifying guidelines. (No income limits.)
• Easy-to-Own 3 Percent Down loan: Lets qualified low- to moderateincome borrowers put only 3 percent down and take advantage of flexible qualifying guidelines. (Limited to borrowers who fall within HUD median-income levels.)
• Easy-to-Own 5 Percent Down loan with 3/2 Option: Allows lowto moderate-income buyers to use their own funds for 3 percent of the down payment and get the remaining 2 percent as a gift, grant, or from an approved Down Payment Assistance Program. (Limited to borrowers who fall within Department of Housing and Urban Development [HUD] median-income levels.)
• FHA Mortgage: Allows all qualified buyers to take advantage of a low down payment with flexible qualifying guidelines, with loan limits set by area.