Subprime Mortgage Loans


Subprime mortgages are loans for homeowners who don’t qualify for traditional mortgage loans. These mortgages were very difficult to obtain in the past; however, the mortgage marketplace has changed dramatically over the past few years.

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Banks and Credit Unions discovered there was a great deal of money to be made in the subprime market as nearly 50% of Americans today have poor credit. This is good news for homeowners, because today’s marketplace allows for competitive interest rates and low fees for those with poor credit ratings.

When applying for a traditional mortgage loan one of the main deciding factors as to being approved is your credit history. If your FICO score is less than 620 then you are considered a credit risk. When a lender loans you money in the form of a mortgage they are assuming the risk that you will make your payments on time. The higher your FICO score, the longer you have been in your job, the less risk you present to the lender.

Because these factors are working against subprime borrowers, they will not get the best deals for their mortgages. Additionally, a subprime lender may require that borrowers prepay points to qualify; this means you’ll have to have cash on hand at closing time.

If you’re in the market for a subprime mortgage your best bet may be to find a good mortgage broker. A good broker can help you find the best deal despite your credit rating.

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