What is a sub-prime rate loans? Are they a good loan to get for a house?

Question

I'm not familure with this sub-prime mess that is going on with mortages these days. Can someone explain this to me? Thanks.

Answer 1

Sub-prime refers to the credit ratings of the borrowers. Because their credit ratings are poor, they generally pay much more in interest for loans or have to use creative financing (ARMs, etc.) to afford a home. You don't choose a sub-prime loan, if you are a sub-prime borrower you end up in one...

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

Answer 2

Only if you have a large income and can afford the higher interest rates that reset.
Otherwise, stay away from them!!!!!
Go for conventional 30 yr fixed and avoid being suckered into sub-prime. And what with today's situation, nobody is getting sub-primes anymore.

Answer 3

sub-prime loan are loans such as mortgages, car loans, etc for those home purchasers or borrowers who dont have good credit and do not qualify for the best market interest rate. Since subprime rate loan is in much higher risk, therefore, the interest rate it offered is much higher that what's in the market. It increases burden of borrowers since their repayment of loan is much higher, thus, often lead to default of loans or foreclosures. In some cases, it can helps borrowers to repair their credit. However, it is such a risky business for both lenders and borrowers.