Not all of us are able to enjoy a perfect credit record; events outside of our control sometimes happen, and not a few peoples’ records have slipped because of surprise medical bills, increases in mortgage premiums and interest rates, sudden unemployment and other negative factors.
Since the recession struck in 2007 even more people have suffered from falling credit scores in spite of working hard and doing all in their power to get their bills paid in full and on time.
A subprime mortgage is a type of loan which is offered to home buyers who have bad credit scores, usually scores lower than 600. These buyers often don’t qualify for standard fixed mortgages, which is why they turn to subprime lenders.
Subprime mortgages usually take the form of adjustable rate mortgages, abbreviated ARMs. ARMs usually have a very low interest rate to start with which is fixed for several years.
After that, the mortgage rate becomes adjustable, and floats based on a national index. If mortgage rates across the country drop, yours will too. If they surge, yours will rise in turn.