How do I Transition From a Subprime Borrower to a Prime Borrower?

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If you are having trouble qualifying for a conventional mortgage, it is likely due to a poor credit score or low income. Borrowers who have poor credit and do not qualify for conventional mortgages have the option of applying for subprime mortgages, however, the interest rates associated with subprime mortgages tend to be higher than conventional mortgage rates.

Although a subprime mortgage is a good option for borrowers who feel that they have no other option, one thing you can consider if you are not eligible for a conventional mortgage is improving your credit score by consolidating your debts. This could save you money in interest over time. By taking the time to pay off your debts improve your credit score, you can slowly transition to a prime borrower and qualify for a conventional mortgage with a better interest rate. But how do you do it?

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What Is a Subprime Mortgage?

A subprime mortgage is a mortgage which is issued to borrowers who do not qualify for conventional mortgages. This could be for a number of reasons including a poor credit score, low income, a high loan to value ratio, and bankruptcy. Because of the risk lenders take on when giving out subprime loans, the interest rates tend to be higher than traditional mortgages but much lower compared to credit cards.

That being said, a subprime loan can be a great way to get large amounts of money fast and easy. For borrowers without many options, it can be an ideal way to get a loan.

How Are Subprime Mortgage Rates Determined?

Subprime mortgage rates depend on several different factors. These factors include the borrower’s credit score, the size of their down payment, the total number of late payments on their credit score, as well as the type of delinquencies.

Borrowers who have credit ratings which are below 600, a history of late payments, or bankruptcy are ideal borrowers for subprime mortgages.

How Can I Improve My Credit Score?

If you are trying to qualify for a conventional mortgage and have poor credit, you will need to start thinking about how you can improve your credit score. Here are some tips.

  • Avoid missing payments
  • Do not open unnecessary accounts
  • Pay off your balances in full
  • Continually pay off debt
  • Consider a debt consolidation loan

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If you want to qualify for a traditional mortgage, there are a few things you can do. Take the necessary steps to manage and improve your credit, and ensure that you have a steady and stable income. If the need arises, you can also consider having a co-signer. You can also look into debt consolidation loans which can help minimize your debt and improve your credit rating over time.

Contact Us Today

If you are in debt and are trying to improve your credit rating to qualify for a mortgage, contact us to find out how we can help consolidate your debts. We understand that everyone’s situation is different. Our lenders look at each situation individually and we can help to develop a customized solution that fits your needs.

Call or text us today at 416-674-6222 or toll free at 1-800-673-2230, or email us at info@clovermortgage.ca for your free no obligation mortgage consultation.

Steven Tulman
Written By Steven Tulman
“Making the process of getting a mortgage an easy and enjoyable experience for every Clover Mortgage client!”