What is a Sub Prime Mortgage, is it a possibility for my situation?

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What Is a Sub Prime Mortgage


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Some mortgage lenders specialize in lending money to people with rocky credit histories. They are called “sub-prime” lenders because they lend money to people who traditional banks consider too risky. If you have had credit problems in the past, a sub-prime mortgage lender could be the easiest way for you to buy a home.

Sub-prime lenders are not charities. Their loans do tend to be more expensive than those from traditional lenders. Sub-prime mortgages usually have higher interest rates than traditional “prime” mortgages. The reason for the higher price is risk. Since sub-prime mortgages are more likely to default, the higher interest rates help the lenders protect themselves.

If you get a sub-prime mortgage, remember that you always can refinance at a later date when your credit has improved. You may only have your sub-prime mortgage for a few years, after which you can get a better mortgage for a lower rate.

A sub-prime mortgage can be a great way to get started. If you have a difficult credit history, traditional lenders may be unwilling to offer you a mortgage. The sub-prime lenders will put you into a home and help you establish a stronger credit history.