Due to the recent economic downturn, sparked by the mortgage crisis beginning in late 2007, you may have heard the term “subprime” mortgage. You may not be aware of what a subprime mortgage loan actually is, however.
Prescott Banking Rates allows you to compare mortgage loan interest rates from a multitude of lenders. If you’re currently shopping for a mortgage loan rate you can afford and would like to understand all of your options, Prescott Banking Rates explains what a subprime loan is and who qualifies for one.
Though the term often comes with a negative connotation, subprime mortgages aren’t always a bad thing. Very strict standards have been placed on subprime lending to prevent us from experiencing economic crises like the mortgage meltdown.
Subprime mortgages are a special class of mortgage loans aimed at high risk borrowers. They are generally fixed for a few years and then adjusted to a much higher interest rate once the initial period ends. During the fixed period, the borrower has a chance to repair their credit so they can refinance their loan to a prime mortgage with a favorable interest rate. This is not always the case, though, and subprime mortgages are often very expensive.
If you are considering a subprime mortgage loan, be sure you can afford the high interest rates and are really ready to purchase a home.