Subprime Loan

A subprime loan is for a high risk borrower who previously would have been denied credit and may not qualify for a conventional loan due to credit problems such as a low credit score, a bad credit history or limited or no credit history, a low income, or a high loan to value ratio (LTV).

Borrowers with low credit scores are viewed as higher risk to lenders and generally are ineligible for prime loans unless they make significant downpayments. Subprime loans have a higher interest rate than prime loans becuase of the increased credit risk to lenders.

Having good credit usually translates into better interest rates, lower payments, and more ease in borrowing money. Bad credit can be a big problem. It usually results from making payments late or borrowing too much money, and it means that you might have trouble getting a car loan, a credit card, a place to live and, sometimes, a job.

Some Facts About Subprime Loans:
*) Subprime loans help make homeownership possible for many families who may not qualify for a conventional loan.
*) Subprime lenders are largely unregulated by the federal government.
*) Many subprime lenders operate under the highest lending standards, but fraud, abuse, and predatory lending problems have also been a troublesome characteristic of the subprime market.
*) Data shows blacks are much more likely than whites to get a subprime loan, and many of the borrowers who take out these loans could qualify for loans with better rates and terms.
*) Subprime borrowers go into delinquency more often and have their properties foreclosed at a higher rate than prime borrowers.

Repair Your Bad Credit

References:
www.hud.gov/offices/fheo/lending/

Federal Laws
Major laws that govern financial institutions and protect individuals in their financial dealings

Organizations

Fannie Mae
Freddie Mac
Ginnie Mae
Nellie Mae
Sallie Mae

Consumer Info

Credit Bureau
Credit Report
Directory of Federal Agencies
Federal Trade Commission (FTC)
Identity Theft
Predatory Lending
Repair Your Bad Credit
Truth in Lending Act
Borrowers Beware

Miscellaneous

Private Mortgage Insurance (PMI)
Prepayment Penalty

Loanfactz.com Supporters