There are pros and cons to such mortgages:
- It allows people with low credit scores a chance to own a home without going through years of trying to establish a better credit history.
- Subprime loans can help borrowers fix their credit scores, by using it to pay off other debts and then working towards making timely payments on the mortgage.
- Closing costs and fees are generally higher with subprime loans; the lender tries to get as much money up front as possible because of the increased risk and chances of the borrower defaulting.
- Even though credit scores aren’t a determining factor for qualifying for the loan, income is. Borrowers must show that they have sufficient income to finance the monthly mortgage payments.
Do you know what's on your credit report?
Learn what your score means.