What is a SubPrime Mortgage? The home mortgage industry divides would-be borrowers into two basic types: Prime borrowers are those who have adequate income and good credit histories. Subprime borrowers are those with problematic credit histories and, often, less-than-adequate incomes. The loans are inherently risky for the lender, as such borrowers are more likely to default on payments, requiring higher interest rates to offset this risk. A majority of subprime loans are refinances, with homeowners looking to lower their monthly payments or to draw out the equity in their homes to pay off their consumer debt or other personal expenses. Typically subprime mortgages are offered at interest rates well above prime, to customers with below-average credit ratings, but they start off will a very low "teaser" interest rate (that soon changed from single to double digits). Subprime mortgage lenders typically target lower-income Americans, the elderly, new immigrants, people with a proven record of not paying their debts on time — just about anyone who would have trouble getting a mortgage from a conventional lender such as a major bank. As the teaser rates of the last two years expired, and were changed to the real subprime interest rate, many people suddenly found their payments double and triple. To make matters worse, housing prices started to fall, so people with subprime mortgages found they could no longer count on the increasing value of their homes to refinance their way out of the mess. By late 2006, one subprime loan in eight was in default across the U.S. Foreclosures were soaring. More than 20 subprime lenders were bankrupt. And the National Community Reinvestment Coalition estimated that as many as 1.5 million Americans could lose their homes by the time all the damage is done.
SubPrime Mortgage Problems As the teaser rates of the last two years expired, and were changed to the real subprime interest rate, many people suddenly found their payments double and triple. To make matters worse, housing prices started to fall, so people with subprime mortgages found they could no longer count on the increasing value of their homes to refinance their way out of the mess. By late 2006, one subprime loan in eight was in default across the U.S. Foreclosures were soaring. More than 20 subprime lenders were bankrupt. And the National Community Reinvestment Coalition estimated that as many as 1.5 million Americans could lose their homes by the time all the damage is done.
Subprime Mortgage Refinancing Tips If you had bad credit history, no down payment or difficult to prove income and are either looking to get approved for a home mortgage loan, or have been approved by a sub prime mortgage lenders check out these tips:
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