What does "subprime" mean? (In terms of the downturn in the real estate market)?

Answer 1

Sub-prime refers to the credit ratings of the borrowers.

A prime borrower had great credit, verified income, etc. and was eligible for the best rates.

Answer 2

When your credit isn't perfect the subprime market is a great option to still get you into a home with little to zero down.

In terms of the downturn in the market; lenders were giving loans (at high interest) to people on homes they couldn't afford. Generally, these loans were interest only or ARMS, so after a few years, the interest rate would reset higher.

They started out with low loan payments, then 2-3 years later, the interest would reset and some payments were doubling. People couldn't afford these new higher payments, some lost jobs, and as the market started slowing, the housing prices started correcting.

Soooo, homes bought at $500k (and were overvalued) adjusted down to $400k and people still owed the $500k so they were upside down and couldn't sell, because no one was going to pay them that much for a house they could get for less and the owners couldn't afford the payment, so foreclosure.

Now people selling are competing against tons of foreclosures, which are selling for a fraction of the price. On zillow.com a person mentioned that they took their house off the market, because they couldn't compete.

Long answer but I hope I helped.

Answer 3

Prime means that people get the best loans. Subprime means that people got loans that would be terrible in a few years but they were told that with the real estate market going up so fast, they would be able to refinance their loan in a few years when the equity in their home was a lot higher and get a better loan. When the market stopped rising, or even went down, these people didn't have higher equity in the home and they couldn't refinance. So, when the loan turn bad, they were stuck. Some people couldn't even sell their home for the amount of money that they owed on the loan.

Answer 4

subprime refers to loans based below the prime market rate. prime rate is percentage points calculated by the stock market depending on the day's stock performance. prime rate is the basis of all credits, loans, stock performance. so, if you have a credit card look at the fine prints your interest rate is based on numerous factors, your credit standing, your income, your credit performance and the prime rate. once the prime rate goes up so does your interest rate. going back if the prime rate at the time of your loan approval is 8.75 and they gave you subprime of -1 then the lowest rate they will give you is 7.75. remember the real estate downturn is not just because of the subprime loans, it is because of the lack of education of the home owners about their loan. the reason why they call it subprime is because most of the banks or real estate companies compete on giving below prime rate (another term for sub prime) and that with the adjustable mortgage and the 40 year/30/50years (10 year interest only) they didn't know what hit them. because their interest rate is depending on the prime rate and that they have no control over that depending on the economy and stock market. hope this helps.

Answer 5

A cul-de sac is an prolonged around area on the tip of a paved highway in a progression. It is going to the final domicile(s) on the tip of the force so autos can actual turn around and head back out. that's in fact a "turn-around" TLC means tender loving care. It means the valuables merely desires a splash touch-up fix and a slow maintenance application. Fixer-top in fact means "as is," which means that's in prefer of somewhat some fix and fixin' up.

Answer 6

It basically means that people were given loans even though they had poor credit, no credit, etc. Someone that you would normally not have given a loan to.