One of the big financial news stories to come out of last week and the week before is the subprime lending crash. Subprime lending is basically home loans made to those with poor credit. The terms, however, can be brutal, with variable rates that can be boosted even higher (and usually 2 to 5 points above the prime rate). The crash was precipitated by many companies folding or reporting losses due to default. The Chicago Tribune offers this:

Once thriving by making loans to millions of spotty-credited consumers who
otherwise wouldn’t be able to realize the American dream of home ownership,
the industry has seen an estimated 30 lenders close shop since late 2006, amid
a rise in delinquency and foreclosure rates, felled by their own lax
underwriting or by borrowers unable to keep up with mortgage payments from 2
points to 5 points above prime. 

So what does this mean for you? Well, if you have poor credit it may mean that you will have a harder time getting a home loan or a refinance. However, for those with better credit looking to buy a home, this could mean better prices. With housing in a slump  anyway, and with subprime lending adding fuel to the fire, a true buyer’s market is becoming more and more likely.

Tags: subprime lending, buyer’s market, subprime lending crash, home loans,
mortgages, poor credit home loan, better credit