What Does a Subprime Mortgage Mean?

Mortgage lenders carefully screen applicants to find out how likely the candidate is to default on a mortgage in the future. Subprime mortgages refer to loans issued to people who would not qualify for a conventional mortgage.

Identification

Subprime mortgages typically include those issued to people with a credit score below 620, according to Bankrate. However, some lenders may use other, less negative terms, such as non-prime, to describe subprime mortgages.

Effects

If you are a subprime borrower, you will have a much harder time getting a loan, and will likely have to pay a much higher interest rate because of the additional risk a lender takes on by offering you a loan.

Warning

Predatory lenders often target subprime borrowers to exploit because of their limited options in obtaining a mortgage. Beware of lenders who encourage constant refinancing, or who offer a much higher loan amount than you can afford.

References

• Bankrate: Subprime Mortgages
• AARP Financial: What is a subprime mortgage?