Loanfactz Definitions

Subprime Loan

Subprime loans are for high risk borrowers who previously would have been denied credit and may not qualify for a * conventional loan due to bad credit problems. Subprime loans have a higher interest rate than * prime loans becuase of the increased credit risk to lenders. More about Subprime Loans

Glossary For This Page
(In Alphabetical Order)

* Conventional Loan
A conventional loan is a * mortgage loan other than those insured or guaranteed by a government agency such as the FHA (Federal Housing Administration), the VA (Veterans Administration), or the Rural Development Services (formerly know as Farmers Home Administration, or FmHA). There is a * down payment required, usually 10 percent to 20 percent of the sales price. A conventional loan does not require * mortgage insurance.

* Credit History
A credit history is a record of your credit use. It is comprised of a list of individual consumer debts and an indication as to whether or not these debts were paid back in a timely fashion or as agreed. Credit institutions have developed a complex recording system of documenting your credit history, called a credit report.

* Default
Failure to perform a legal obligation; a default includes failure to make the payments on a financial obligation, but may also be a failure to perform some action or service that is non monetary (not relating to money).

* Down Payment
Paying a portion of the price of a home which is not borrowed and paid up front.

* Interest Rate
The percentage of a sum of money charged to the borrower by the lender for borrowing the lender's money.

* Lien
A claim or charge on property for payment of some debt. With respect to a mortgage, it is the right of the lender to take the title to your property if you do not make the payments due on the mortgage.

* Mortgage
A mortgage is a legal document you sign to show that you have granted the lender a * lien on your property as security for repayment of a loan, giving the lender the right to take your property if you * default on the terms of the loan. Some states call it a deed of trust instead of a mortgage.

* Mortgage Insurance (MI)
Mortgage Insurance (MI) or called Private Mortgage Insurance (PMI) is insurance needed for a mortgage with a low down payment, usually a down payment less than 20% of the price of the home or, in a refinancing, when the amount financed is greater than 80 percent of the appraised value. Mortgage Insurance protects lenders against loss if a borrower defaults on the loan. Private mortgage insurance is provided by a private mortgage insurance company, is paid by the borrower (you), and is included in the mortgage payment.

* Prime Loans
Prime loans have better * interest rates and are typically made to borrowers who have a strong * credit history and can demonstrate a capacity to repay their loans.

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