Raleigh Residential Real Estate – What’s Up with the Mortgage Market? What is a Subprime Loan anyway?

Raleigh Residential Real Estate – What’s Up with the Mortgage Market? What is a Subprime Loan anyway?

There has been a lot of news regarding the state of the lending industry in recent days I thought it might be helpful if I shared the definition of one of the lesser known mortgage industry terms.

A Subprime Loan is one that is made to a borrower who has a lower credit rating. The poor credit rating may not be the result of a bankruptcy, but may be the result of regularly not paying bills on time, especially when they are late by 60 – 90 days.

A credit score below 620 will typically put one into the subprime loan category. However, other factors do enter the picture. Things like the purpose of the loan (is it for a primary residence or an investment property), the amount of downpayment, the debit to income ratio and the ability to document income are all factors that a lender will consider when deciding to make a loan.

A subprime loan normally will be at a higher interest due to the higher risk that is being assumed by the lender.

We have definitions of other real estate and mortgage industry terms on our website at  www.PolingTeam.com  click on the Real Estate Glossary link at the bottom left of the left side navigation or click here Real Estate Glossary