What is a Sub-Prime Mortgage?
When a person starts looking for a new mortgage one of the most important things they need to consider is their current credit scores and their credit history. Now in some cases people have good credit to excellent credit and they can qualify for a conventional mortgage. Sometimes people even with fair credit can qualify for a conventional mortgage.
However there are some people out there with bad to poor credit, but they also want to buy a new home or qualify for a new mortgage. Now in most cases banks and mortgage companies will turn down people with bad or poor credit but there is an option out there for those same people.
Now you may be wondering what people with poor credit can qualify for? There is a mortgage called a sub-prime mortgage. Now a sub-prime mortgage is designed for people with poor credit; and poor credit is usually any score below a 600 credit score.
Now of course if the lender is going to give a person a mortgage with a low credit score that means that the loan company is taking on some major risk. Most companies are not designed to lose money so what most mortgage companies do that provide sub-prime mortgages is charge a higher interest rate to offset their risk.
Now a person may be think to themselves that is not fair. However one has to always keep in mind that when a mortgage company loans the money for a mortgage they are anticipating that they will get their money back. If a person has a delinquent credit history that means that there is a very good chance that the borrower may not pay the loan back, so that is why sub-prime mortgages have a higher interest rate. The great news is that instead of a person being told no, they can qualify for a mortgage and have their home.