An excellent alternative to the traditional subprime mortgage is an Expanded Approval Fannie Mae loan. Borrowers who "just miss" qualifying for a traditional Fannie Mae Loan for various reasons can obtain financing through this program with a slight pricing adjustment from standard Fannie Mae pricing.The Fannie Mae Expanded Approval also offers a a feature called "Timely Payment Rewards" whereby you can reduce your interest rate if you make your mortgage payments on time for 24 months in a row. Contact your mortgage professional to see if they offer this program.
Expanded Approval financing allows purchase money transactions with as little as $500 from your own funds. If you have 3% of your homes purchase price available in the form of a gift from a relative, grant from a non-profit agency, or from employer assistance you need not use any of your own money in the transaction.
With a less than perfect credit history, a Fannie Mae Expanded Approval(EA) offers 100% financing for purchase money transactions and up to 90% Cash-Out financing. With many subprime lenders drastically altering their high loan-to-value programs, an EA loan may be your best solution.
Expanded Approval(EA) Loan Levels and pricing are based on your credit, income, assets, loan-to-value,and property type. In other words, they based on your total capacity to repay rather than solely based on your credit score. Loans are scored through Fannie Mae's Desktop Underwriter(DU). Be sure to give your mortgage professional all of your asset information, including retirement accounts, so your loan can be scored properly.
Freddie Mac has their own program which is very similar and can be scored through their underwriting system known as Loan Prospector(LP) as well. Their program is known as the A-minus approval.
