What is a subprime mortgage?

A subprime mortgage is a type of home loan that is offered to borrowers with lower credit scores or a lack of credit history. These borrowers are considered to be a higher risk and as a result, have to pay higher interest rates in order to get the loan. In California, subprime mortgages are usually given out to borrowers who have a credit score below 620 or a history of bankruptcy or foreclosure. The interest rate on a subprime mortgage is usually higher than that of a conventional loan and can range anywhere from 1-3% higher. This means that the borrower will pay much more in the long run due to the increased costs of the loan. Additionally, subprime mortgages have higher fees and penalties for late payments. Though subprime mortgages can be an option for those who have difficulty getting approved for a conventional loan, it is important to be aware of the risks associated with them. Before taking out one of these loans, it is important to make sure you understand the terms of the loan and can comfortably make the payments without putting yourself in a financial bind. Additionally, borrowers should consider researching other loan options before deciding on a subprime mortgage.

Related FAQs

What is a "point" on a mortgage?
How does my credit score affect the mortgage interest rate I qualify for?
What is the maximum mortgage loan amount I can qualify for?
What is a bridge loan?
What is the difference between a primary and secondary mortgage?
What documents do I need to provide to a lender to qualify for a mortgage?
How do I know if I have a good mortgage loan offer?
What is the difference between a rate lock and a float-down?
What is a “no cost” mortgage?
What is a mortgage?

What is a subprime mortgage?

Related FAQs

Related Blog Posts