Undoubtedly, you’ve heard the radio commercial claiming you can get a mortgage despite having bad credit. Bad credit mortgages are better known as subprime mortgages.

Subprime

“Subprime” is a euphemism for a borrower who simply doesn’t qualify for a traditional home mortgage. Subprime loans used to be very difficult to get, but things changed in the 1990′s. Banks began to realize there were a lot of borrowers with less than stellar credit or other problems. More borrowers meant more revenues, so banks started creating subprime mortgages and the game was on. As a result of these new loans, home ownership in the United States has risen to all time highs.

One of the biggest determinants in qualifying for a loan is your credit score. A borrower’s credit history is analyzed using a “FICO” score, named after Fair Isaac and Company, Inc. Generally, a FICO score below 620 is considered an indication of bad credit. The borrower is then classified as a subprime borrower.

Importantly, a FICO score below 620 is not the only reason a person may be classified as subprime. An infrequent borrowing history, new employment position or expensive home may also key the designation. In fact, nearly 50 percent of subprime borrowers have FICO scores above 620.

When a lender writes a mortgage, it is betting on whether the borrower will repay the loan completely and in a timely manner. The better your credit score, employment history and so, the better deal you will get from the lender. Obviously, subprime borrowers aren’t going to get the best deal. Instead, a lender may require a larger down payment and will certainly designate a higher interest rate than given to “good” borrowers. In addition, subprime borrowers may have to pay points just to get the loan.

The trade off of all of this, of course, is that you get a loan to buy a home. Home ownership has consistently proved to be one of the best long-term investments in the United States. While Americans are criticized for failing to save money, they are effectively doing so by purchasing homes and building equity in them.

Should you apply for a subprime loan if you have less than stellar credit or other problems? There is no right answer, so you should consider sitting down with an independent mortgage broker to analyze your situation.

Mortgage cover can be a valuable lifeline to have in an uncertain world and although payment protection products have taken beating over the last few years when it was revealed there had been wide spread mis-selling of policies and extortionate premiums charged for the cover, it is possible to find cheap mortgage cover if you shop around and get quotes from standalone specialist providers.

Mortgage payment protection insurance – or ASU insurance as the cover is also know ? can, providing it meets your circumstance, give you the money each month with which to meet your mortgage repayments if you should come out of work due to suffering an accident, sickness or through unemployment of no fault of your own. The cover would kick in after a pre-determined amount of time of you being out of work which can be between the 31st day to the 90th day and would then continue to give you a tax free income for up to 12 months and with some providers for up to 24 months.

You do however have to check that cheap mortgage cover would be suitable for your circumstances as while mortgage payment protection can help you to keep the roof over your head it isn’t suitable for everyone. All policies will have exclusions within them that could mean it isn’t suitable for your needs, with the most common being if you only work part time, are retired or if you suffer from an illness which has caused problems during the last 2 years. The exclusions can be found in the small print of the policy and it is essential that you read these along with the key facts.

You have to get several quotes for the cover if you want cheap mortgage cover and a specialist will give you the cheapest quotes whilst at the same time making sure that you have access to the information needed to ensure that a policy would be suitable for your circumstances. If you are ever doubtful about a policy then ask the advice of those who specialise in offering payment protection products before buying what could be essential cover to keep the roof over your head.