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Sub-prime mortgages offer financing for those with poor credit to finance the purchase of a home. Today's sub-prime mortgages offer low down payment options with no private mortgage insurance (PMI). As a result, more people are finding it easier to buy a home.

Sub-prime Mortgage Options

Sub-prime mortgages come in as many flavors as conventional loans. Just like with a conventional loan, low down payments or zero down will increase your interest rate. However, you have no PMI premiums to pay.

Another option is to buy points to lower your interest rate as well, but this only makes sense if you plan to keep your mortgage for seven or more years. A better plan is to improve your credit score, and then refinance in two to three years for a conventional loan.

Sub-prime Lenders

More and more financing companies are offering sub-prime mortgages. Even Freddie Mac and Fannie Mae offer sub-prime programs. So to find the best rates and terms, you should request quotes from both conventional and poor credit lenders.

When you are comparing lenders, look at the APR for a quick check. The APR includes both interest rates, points, and fees. However, you will also want to look at terms, making sure there are no fees for refinancing or early payment.

To quickly gather this information, make use of the internet. Most lenders offer quotes online. You can also request quotes from a mortgage broker, who will provide you with several quotes at once. When you find a lender with a competitive bid, you can request more information or apply online for speedy approval.

Sub-prime Benefits

Subprime mortgages provide you the chance to purchase a home while improving your credit history. Instead of throwing your money away on rent, you are building up equity in your home that you can tap into latter. You can also deduct your interest from your taxes.

Regular mortgage payments will also improve your credit history. So not only will your rates improve with other types of credit, but you can also refinance your mortgage in a couple of years for lower interest payments.