What do you mean by subprime mortgages?

In fact, there are two levels of mortgages, one is for people with low credit and one is for people with good credit, so can people with low credit apply for a mortgage? The answer of FALON Financial Network is yes, this kind of is called subprime mortgage, subprime mortgage for everyone, not very familiar with this term. The so-called subprime loans, in accordance with the guidelines issued by the central bank for the classification of loan risks, refers to the borrower’s ability to repay the loan has obvious problems. Here, let’s learn more about it in depth with FALON Financial Network!

As mentioned here, a mortgage is a loan that the borrower obtains from the bank with certain collateral as a guarantee for the goods. This is a kind of bank lending method, collateral, in general, including securities, national bonds, various stocks, real estate, as well as goods bill of lading, bill of lading or various other documents to prove the ownership of goods.
Now that we have a certain understanding of mortgage loans, we will further understand the meaning of subprime mortgage loans and their characteristics.

1, the meaning of subprime mortgage

A subprime mortgage is a loan provided by some lenders to borrowers with poor credit and low income.

2, the characteristics of subprime mortgage loans

Subprime loans have low lending standards, the total loan amount and the ratio of the property price can be as different as 85%, or even zero down payment, in addition to the repayment amount and the income ratio can be more than 55%. The creditworthiness of the loan recipients is relatively low. Subprime loans are mainly offered to low-income families with no good credit history, and even to illegal immigrants.

With variable interest rates and low and high repayment rates, the proportion of variable rates in the overall subprime lending exceeds 85%. The main body of the operation is the mortgage lending company, the main way is that the mortgage lending company first attracts people to the loan, then packages all the loans of the lender, through the appraisal pricing appreciation, and then sell the loan to institutional investors (pension funds, hedge funds), through this way transferred the financial and lending risk. This dilutes the risk, but the potential risk is still there.