| Many people believe having bad credit means that | | | | prepayment penalty is charged to the borrower if they |
| buying a home is out of the question. However, there | | | | decide to sell the home or refinance before the term |
| are purchase loans available for consumers with less | | | | of the loan is complete. A balloon payment means that |
| than perfect credit. Read on for a basic lesson in | | | | the borrower has to pay off the loan in full after a |
| subprime lending. | | | | certain period of time. If they are unable to do so, they |
| The credit score consumers see on their credit report | | | | must refinance the loan or sell the home. |
| can range from approximately 300 to approximately | | | | What if a consumer already owns a home, but is |
| 900. (A credit score can also be referred to as a FICO | | | | faced with bad credit? In order to help clean up their |
| score). Most people fall somewhere between the 600 | | | | FICO score, some homeowners may want to cash |
| and 700 range. According to Bankrate, those with a | | | | out on their home equity. Sometimes called bad credit |
| 620 credit score or lower tend to have a history of | | | | mortgages, these loans are designed to take the |
| late or missed payments on their existing debt and | | | | equity in one's home and use it to pay off credit card |
| most likely will not qualify for a conventional mortgage. | | | | and other types of debt. These loans typically have |
| These consumers are considered subprime, and the | | | | relatively low mortgage interest rates and the interest |
| mortgages that are granted to them are called | | | | is usually tax deductible. |
| subprime mortgages. | | | | There are definitely options for those with less than |
| The interest rates for non-prime mortgages are higher | | | | stellar credit who are looking to purchase a home or |
| than for traditional, or prime, mortgages, but how much | | | | use existing equity to get out of financial trouble. |
| higher can vary a great deal from lender to lender. The | | | | However, because of the variables that exist within |
| rate quoted to a consumer also depends on factors | | | | the structure of subprime mortgages, borrowers |
| such as credit score and down payment size. | | | | should always compare rates among mortgage |
| Non-prime loans may also carry a significant | | | | brokers and know their credit score before shopping |
| prepayment penalties and/or balloon payments. A | | | | for a mortgage. |