There are pros and cons to such mortgages:
- It allows people with low credit scores a chance to own a home without going through years of trying to establish a better credit history.
- Subprime loans can help borrowers fix their credit scores, by using it to pay off other debts and then working towards making timely payments on the mortgage.
- Closing costs and fees are generally higher with subprime loans; the lender tries to get as much money up front as possible because of the increased risk and chances of the borrower defaulting.
- Even though credit scores aren’t a determining factor for qualifying for the loan, income is. Borrowers must show that they have sufficient income to finance the monthly mortgage payments.