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Information on characteristics of subprime mortgages

Mark Cappel
UpdatedApr 17, 2024

All this talk of sub primes has me nervous. I might have one and not know about it?

All this talk of sub primes has me nervous I might have one and don't know it! My mortgage papers have the same (or relatively) the same payment listed for 30 yrs @ 5.99%. We have had our house for about 3 yrs? Does that sound right for a traditional mortgage or should I be looking for something else in the papers? Please set my mind at ease...Thanks so much.

Subprime mortgages were created to allow risky borrowers a chance to own a home. Risky borrowers are those whose credit scores are low and whose credit histories are unfavorable. For these people, who were previously unable to own a home, subprime mortgages answered a prayer.

If you have one or more of the credit characteristics listed below, your loan may have "subprime" terms.

1. The interest rate will be unconventional. Subprime mortgages are known for their high interest rates, which lenders use to offset the risk involved. The interest rates are often mixed, with the first two to three years at a fixed rate and the subsequent years adjusted to the fully indexed rate.

2. The down payment will be low or not required. Subprime lenders often allow borrowers to mortgage 90 percent or more of the home's value. One hundred percent loans also are frequent with subprime lenders.

3. You've had two or more 30-day delinquencies in the last 12 months, or one or more 60-day delinquencies in the last 24 months.

4. There was a judgment, foreclosure, repossession, or charge-off in the prior 24 months.

5. If you filed for bankruptcy in the last 5 years.

6. If you have a high percentage of debt compared to income that may limit your ability to cover family living expenses after deducting total monthly debt-service requirements from your monthly income.

In your case, the 5.99% interest rate that you have is a good rate. What you will need to do is carefully review the fine print to check to see if the interest rate is fixed for the life of the 30 year term or will be adjusted after a period of time. Most subprime loan contracts also contain a prepayment penalty that usually expires after the fixed rate is over.

If you can rule out all the characteristics stated above and if you find that the interest rate on your loan is fixed for the 30 year term, then there is no cause for worry. You can read more about sub-prime mortgages at

I hope the information provided helps you Find. Learn. Save.



The mortgage market: what's new?

It is expected that mortgage rates are subject to change. Homebuyers and those refinancing their mortgages should pay close attention to the latest mortgage rate

Mortgage rates April 10, 2024
According to Freddie Mac, the 30-year mortgage rate for the week of April 10, 2024 stands at 6.88%. This 6 basis points increase from the previous week's rate.
Additionally, Freddie Mac reports that the 15-year mortgage rate for April 10, 2024 is 6.16%, indicating a 10 basis points increase from previous week’s rates.
Note: A basis point is equal to one-hundredth of one percent (0.01%). In numerical terms, if the mortgage rate changes by 20 basis points, it means the rate has changed by 0.20%.

Understanding the impact of mortgage rates on your finances
When it comes to determining your monthly payment, mortgage rates are a key factor to consider. Here are the avergage interest rates (APR) for April 14, 2024 based on Zillow data for borrowers with a high credit score (680-740) in the United States:

  • 30-year conventional loan is 7.09%
  • 15-year conventional loan is 6.29%
    Based on the provided rates, a $279,082 30-year mortgage would result in a monthly payment of $1,874. Alternatively, a 15-year mortgage would require a monthly payment of around $2,399.

Explore your options and secure pre-approval today!
To make your life easier, we highly recommend shopping around for mortgages and getting pre-approved. This will streamline the home-buying or refinancing process and make it a breeze. Ready to get started? Check Out mortgage rates now for the best options available.