What is a Sub-Prime Mortgage?

A sub-prime mortgage is a bad credit mortgage, designed for people who have trouble getting a home mortgage because their loan request does not fit the conventional lender guidelines. A sub-prime mortgage can offer financing with less stringent requirements to qualify. The trade off for the bad credit will be somewhat higher rates or fees, and the maximum loan amount may be limited to a lower loan to value. A sub-prime or bad credit mortgage is usually made by a lender who allows non-conforming conditions, such as, low credit scores, excessive debt, collections, bankruptcy, or even a foreclosure. 

• Hard to Prove Income - Lenders who offer a bad credit mortgage may not require the conventional income documentation to qualify.
   
• Excessive Debt - Sub-prime mortgage guidelines allow for higher debt ratios, where conventional lenders would decline a loan for too much debt. 
   
• Derogatory Credit - Flexible underwriting on a sub-prime mortgage allows for low credit scores, collection accounts, and other credit problems.    
   
• Bankruptcy or Foreclosure.  Extreme bad credit, including a bankruptcy or foreclosure, can be offset with compensating factors like more equity.