This mortgage crisis of 2007 – 2008 was one of the hottest news topics of that period, and it was largely fueled by the subprime mortgage industry.
By way of definition, subprime lending is a way to grant home loans to borrowers with bad credit. A “subprime borrower” then is a person with bad credit who does not qualify for the top tier loan rates offered by the mortgage lender. In other words, a subprime borrower is a person who has had trouble paying back loans and credit lines in the past, and therefore represents a higher risk for the lender.
As a result of the subprime mortgage crisis, tougher regulations have been imposed on the lending industry as a whole. This in turn means that lenders will place greater emphasis on credit scores when making loans, and also that fewer lenders will make loans to subprime borrowers. In fact, some of the largest subprime lenders of the 1990′s are disappearing as I write this guide.
Here’s what this means to you, as a home buyer:
Good credit has always been important when buying a home and applying for a mortgage loan. But these days it’s even more important to have good credit, because the number of options for “bad credit home buying” is diminishing.