Previously hailed as one of the defining causes that fueled the burst of the housing bubble, subprime mortgages might be making a comeback, but this time things are different, reports CNN Money.
The difference nowadays is that these subprime loans are much more costly than they were prior to the recession, with lenders charging interest rates of as high as 8% to 10% and requiring borrowers to make down payments of as much as 25% to 35%, notes CNN.
The premium price might be worth it for first-time homebuyers and former homeowners who are trying to build or repair their credit that may have been “ruined” in the housing bust, and who have nowhere to turn, the article suggests, stating that Fannie Mae and Freddie Mac won’t back loans issued to subprime borrowers.
In addition to smaller lenders that have begun offering subprime mortgages, Wells Fargo recently lowered its minimum credit score requirement for borrowers to obtain Federal Housing Administration loans.
“It will open up access to credit for many lower income families, including first-time homebuyers,” said Wells Fargo spokesman Tom Goyda in the article.
Written by Jason OlivaPrint Article