Subprime

What exactly doesthe subprime rate mean? How is it different from the regular rate? Somebody school me up.

 

Subprime means your credit is poor. So they are loans to people with poor credit, and whatever way they are structured, the price is higher than if their credit was good.

I think the term has been lumped into the whole mortgage 'crisis', but alot of stuff caused that. 100% LTV in a bubble market being a big part, and those may not have been subprime.

 

Sub is short for submarine. Prime means Grade A, high quality beef. Therefore, 'subprime' would be a roast beef hoagie.

 

Basically there were/are 3 levels...

Conforming
Alt-A
Subprime

Subprime loans are generally for poor credit, someone with a recent BK, late mortgage payments, etc...

Even subprime had certain cutoffs, it was more or less credit score based. Lower the score, higher the rate. 3 years ago you could do 100% with a 560....FYI...560 is fucking terrible. IMO that's a guaranteed foreclosure.

Subprime loans DID have value. For refinancing, people could consolidate all their debt into one loan...pay the fucking mortgage (the 1 payment) every month on time for a year and (most likely) be able to refi into a conforming loan. Sadly, they never do. They swear they learned their lesson. BS. Call them in 6 months and they've already missed a mortgage payment, bought a new EXPENSIVE car, and run up their cards again.

I say let the fuckers foreclose.

End rant.

 

Isn't 660 considered borderline subprime?

 

Nah. You can do conforming loans down to 600. Even lower with a BIG downpayment.

Subprime is REALLY stuff that Fannie Mae, Freddie Mac, and the Alt-A programs won't take.

 

Freakshow -

When I bought my current house in 2005, I was given an 80/20 split mtg because I didn't have 20% available to put down. My 80% is a five year ARM that will begin to edge up at the end of 2010. I have ALWAYS had outstanding credit. last time I checked, my score was 798.

Did I get ripped off?

Also - I will want to re-finance my main 80% mtg (approx 110K) but still don't have 20% to put down and I doubt I have any equity really since I've only had my house for three years and the crappy market currently...

I still have great credit, a small car payment, no other debt and I make approx 100K annually. Can I be refinanced with a good fixed rate? You think I should I wait awhile?

 

You can refinance the first a resubordinate the second (keep it in the second lien position). If you have 3% equity you can do 1 loan @ 97% with pretty darn good rates.

You should look at both scenarios.

You still have 2.5 years left on that ARM...what's the current rate? I have an ARM up in September and I'm milking it until the end.

 

That's seems to be the thinking that got us into this whole mortgage mess.