A loan that does not meet the credit underwriting guidelines of FNMA, FHLMC, FHA, VA or major-non conforming purchasers. Subprime loans allow borrowers to qualify with more severe mortgage delinquencies and higher debt ratios. Often referred to as "B/C Loans"
A generic term for a mortgage involving higher risk on the part of the lender. These loans usually carry a pre-payment penalty but are a useful tool for helping individuals with a recent bankruptcy to be able to purchase a home
A loan offered to people who do not qualify for a conventional loan, either because of low income, a high loan-to-value ratio, or poor credit history. Generally carries a higher interest rate than a conventional loan.
These loans are priced higher than prime loans, often much higher. Loans to borrowers whose credit is less than perfect will almost always be subprime loans. There are also other circumstances that lead to subprime loans, including high outstanding debt, unproven income, etc. Even borrowers with good credit may receive subprime loans for a variety of reason, including fraud, discrimination, failure to shop around, etc.