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We Tell You The Risk of Subprime Mortgages by a New Name

We Tell You The Risk of Subprime Mortgages by a New Name

We Tell You The Risk of Subprime Mortgages by a New Name

The mere mention of the word “subprime” is enough to send chills down the backs of investors, bankers, and homeowners. And there’s a very good reason why. Subprime mortgage were one of the main drivers that led to the Great Recession. But they seem to be making a comeback with a new name—nonprime mortgages.

There are several different kinds of subprime mortgage structures available on the market. But does a rose by any other name smell as sweet? That may not necessarily be the case. Read on to find out more about Kentucky fast installment loans these mortgages and what they represent.

Key Takeaways

  • A subprime mortgage is a type of loan granted to individuals with poor credit scores who wouldn’t qualify for conventional mortgages.
  • Subprime mortgages are now making a comeback as nonprime mortgages.
  • Fixed-rate mortgages, interest-only mortgages, and adjustable rate mortgages are the main types of subprime mortgages.
  • These loans still come with a lot of risk because of the potential for default from the borrower.
  • New nonprime mortgages have restrictions placed on them and must be properly underwritten.

What Is a Subprime Mortgage?

A subprime mortgage is a type of loan granted to individuals with poor credit scores—640 or less, and often below 600—who, as a result of their deficient credit histories, would not be able to qualify for conventional mortgages. ? ?

There’s a large amount of risk associated with any subprime mortgage. The term subprime itself refers to the borrowers and their financial situation rather than the the loan itself. Subprime borrowers are more likely to default than those who have higher credit scores.

Because subprime borrowers present a higher risk for lenders, subprime mortgages usually charge interest rates above the prime lending rate. ? ? Subprime mortgage interest rates are determined by several different factors: Down payment, credit score, late payments and delinquencies on a borrower’s credit report. ? ? Daha fazla hakkındaWe Tell You The Risk of Subprime Mortgages by a New Name oku