Subprime Mortgage Loans - What Is A Subprime Loan?

Perhaps you have seen a television commercial or billboard

advertising super low mortgage interest rates. If you have good

credit, you are likely a good candidate for such loan programs.

On the other hand, if your credit score is low, obtaining a

prime loan rate is not very feasible. In this case, a subprime

loan is the best option.



Subprime vs. Prime Mortgage Loans



Individuals familiar with home loans are likely aware of two

loan programs. Those with a good credit rating will generally

qualify for prime loan rates.



Moreover, homebuyers who have cash

for a down payment and closing costs will also qualify for prime

rates. If your home buying situation is slightly different, you

may qualify for a subprime loan.



What Are Subprime Mortgage Loans?



Subprime mortgage loans are primarily offered to individuals

with low credit scores. These persons do not qualify for

traditional financing. Mortgage companies and other financial

lending institutions have exact lending requirements.



If an

applicant does not fit their criteria, the loan application is

denied.



While getting approved for a mortgage loan with bad credit is a

major feature of subprime loans, there is one main drawback to

subprime loans. Because large portions of the loans are granted

to individuals with poor credit, the odds of these loans

defaulting are high. Because of this, most subprime loans have a

higher interest rate. Of course, rates depend on credit.

Applicants with fair credit may get approved for comparable

rates, whereas those with extremely low credit scores can expect

rates with a two or three point increase.



How to Choose a Subprime Mortgage Loan Lender?



Some lenders specialize in subprime loans. Furthermore, many

traditional mortgage companies have begun offering subprime

loans. The fastest and easiest way to locate a reputable

subprime lender is through a mortgage broker.



Everyone's situation varies. Some bad credit applicants have

funds for a down payment and closing, whereas some prime

applicants do not have extra money to cover these costs.



A

mortgage broker is able to find the best loan program for your

situation.



To begin, applicants will need to submit a quote request. You

must include information such as income, credit rating, home

price, etc. Based on your profile information, lenders will

compete for your business and submit detail quotes. Thus, you

are able to review mortgage rates and terms before choosing a

loan package.