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Subprime Mortgage

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					Subprime Mortgage

        By Jae-Suk Han
Subprime mortgage is a type of mortgage
 that is normally made out to borrowers with
 lower credit ratings.
Subprime borrowers generally have a
 weaker credit profile than that of a prime
 borrower.
They have either missed payments on a debt
 or have been late with payments.
As a result of the weaker credit profile,
 subprime borrowers have a higher
 possibility of failing to pay than prime
 borrowers.
For this reason, a conventional mortgage is
 not offered to them because the lender
 views the borrower as having a large risk of
 not paying back the loan.
Lenders charge a higher interest rate to
 compensate for potential losses from customers
 who may run into default or trouble.
Therefore, lending institutions often charge
 interest on subprime mortgages at a rate that is
 higher than a conventional mortgage in order to
 compensate themselves for carrying more risk.
It is often useful for people with low credit
 scores to wait for a period of time and build
 up their scores before applying for
 mortgages to ensure that they are eligible
 for a conventional mortgage.

				
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