Subprime Mortgage

What is a subprime Mortgage?

A subprime mortgage is a loan that is given to people with poor credit scores, being lower than 600.  These are people who don’t qualify for conventional mortgages.  The interest rates are generally higher on subprime mortgages because these homeowners don’t qualify for conventional loans.

These loans can be extremely misleading to borrowers because they initially pay a lower interest rate, then all of a sudden the interest rate will jump to a number that is unaffordable for the borrowers.  This is what lead to the subprime meltdown.  It is known that about 80% of mortgages issued in the recent years were subprime mortgages, putting  America in a terrible state.  Home value declined drastically, which made it much harder to refinance. These were securities that were backed by subprime mortgages, which caused a monumental decline in many major banks.    In effect this tightened credit all around the world.

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Housing Assist Coldwellbanker