Undoubtedly, youve heard the radio commercial claiming you can get a mortgage despite having bad credit. Bad credit mortgages are better known as subprime mortgages.
Subprime
Subprime is a euphemism for a borrower who simply doesnt qualify for a traditional home mortgage. Subprime loans used to be very difficult to get, but things changed in the 1990s. Banks began to realize there were a lot of borrowers with less than stellar credit or other problems. More borrowers meant more revenues, so banks started creating subprime mortgages and the game was on. As a result of these new loans, home ownership in the United States has risen to all time highs.
One of the biggest determinants in qualifying for a loan is your credit score. A borrowers credit history is analyzed using a FICO score, named after Fair Isaac and Company, Inc. Generally, a FICO score below 620 is considered an indication of bad credit. The borrower is then classified as a subprime borrower.
Importantly, a FICO score below 620 is not the only reason a person may be classified as subprime. An infrequent borrowing history, new employment position or expensive home may also key the...
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