Subprime Mortgage Loans

Have a low FICO score? Bad credit? The below article covers how a subprime mortgage loan can be a viable financing option for you.

Subprime mortgage loans are loan products that charge a higher interest rate and increased fees over prime mortgage loans. Generally, people with low FICO scores have a difficult time qualifying for traditional (prime) mortgages. Because of this, the subprime market was developed in order to provide people with low FICO scores a means for purchasing homes. FICO stands for Fair Isaac Corporation – the corporation that calculates each person’s creditworthiness and assigns a numerical value to that “creditworthiness.” Although the formula itself is considered a trade secret, it is based off factors such as employment and residential stability, amount of available credit, and financial obligation records. There are three major reporting agencies: Equifax, Experian, and TransUnion. These companies also have their own formulas for determining a persons’ creditworthiness. However, the FICO formula is considered to be the industry standard. A low FICO score almost always indicates a poor history of paying bills. Although a prime lender will generally be unwilling to take on the risk that a borrower with a low FICO score presents… subprime mortgage lenders offer subprime loans to individuals with less than desirable credit.

Continue Reading...