Subprime Mortgages – Buy a Home even with Bad Credit

2007-03-08 10:33:40

( Financial )



The term subprime refers to a borrower who is not eligible for a traditional home mortgage. Traditional mortgage lenders have very strict lending guidelines that a borrower has to meet in order to secure a loan. A big factor that determines qualification is a borrower’s credit score. Usually, borrowers with a credit score below 620 fall under the subprime category. Other factors that are considered are a person’s credit history, employment record, the price of a home, etcetera.

Simply put, subprime mortgages are loans intended for individuals with low credit rating and other credit problems. It used to be difficult to secure mortgage for people with bad credit. But since so many people are going through all kinds of credit problems, the market for subprime mortgages have grown and so have the number of lenders who are offering this type of loan.

Many traditional mortgage companies now offer subprime mortgage loans, even mortgages after bankruptcy are available. You can also find lenders who specialize in subprime mortgages. A faster way to find a good deal is to work with a mortgage broker who can match you with the loan program that suits your needs.

To apply for a mortgage loan, you will have to present a quote request, along with your employment and income details, credit score, and home price, and other information. Lenders will then send you mortgage loan quotes based on the information you have provided. Make sure you review and compare the rates and all other details on the quotes to get the most competitive and suitable loan package for you.

While the obvious benefit of subprime mortgage is being able to get a loan in spite of bad credit, this fact also leads to a major drawback. The high likelihood that people with credit problems will default on payments put lenders at greater risk. Consequently, subprime mortgages have higher interest rates and often require larger down payment than prime mortgages. Nevertheless, for those with less than ideal credit, a subprime mortgage loan is often the best option in order to purchase a home.


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