Sound Off: Thoughts on the return of subprime mortgages?
A: Subprime mortgages are home loans designed for and marketed to borrowers with lower credit scores and/or poor credit histories. Subprimes were blamed for the 2007 Recession’s wide-reaching impact and quickly disappeared shortly after. Lenders have become very strict on their guidelines and the return of subprime mortgages means that home buying may get easier for people with less-than-perfect credit, which can ultimately stimulate the economy.
While subprime lenders will be more understanding of a borrower’s credit score, they will be tougher on their income and cash flow. A borrower must be able to prove they have sufficient income and cash flow to qualify. So even though subprime may be riskier, they are still suitable for those that wouldn’t normally be able to buy a home.
The negatives for subprimes are for some, taking out these loans can backfire with them ending up in more trouble than when they started. Subprimes offer up a dream to people regardless of the risk, and sometimes things can go catastrophically wrong. As the saying goes, “with great risk comes great reward” if you want a home and can get it through a subprime the risk may be worth it.