Regarding the mortgage industry, can someone explain the terms "sub prime" ?

Question

I have heard as well as read, this year alone, 1 million Americans will lose their homes to foreclosure.

The mortgage industry uses so many terms most individuals don't understand and today, I need clarity!

Maybe, just maybe if people were given a mortgage dictionary, if you will, prior to obtaining a mortgage, they would understand what they are about to pursue.

What do the words "sub prime" mean? Please explain to me, as if I were a ten year old!

Thank You Kindly!

Answer 1

subprime is a term lenders use for financing high risk loans - people with bad credit or no credit - high interest rates, long terms. The term is used in the auto industry as well -

Answer 2

i am not an expert either, but i believe sub prime means mortgages that are usually loaned to people with less than perfect credit, so they dont qualify for the best, or "prime" rate of interest on the loan. they are paying more interest, a bigger part of their payments are going towards interest and not the principal.

they are talking about people with these kinds of mortgages, they are in a worse position than people with better credit, more money, etc , and are paying more interest because they cant get a better loan, cant afford these mortg, now that the rates have gone up, also with the economy being bad, these homeowners will be the first to lose their homes, because they feel the pressures the most.

Answer 3

i work for a subprime credit card... and basically it for people that don't have great credit that may be deemed high risk in terms of fullfulling there loan agreemnt whether it be credit card of mortgage