There’s been a lot of talk and concern about subprime mortgages and they are partially to blame for the housing crisis in the United States today. But what is a subprime mortgage? Subprime mortgages are home loans that are giving to people with less than optimal credit scores, typically their score is below 620. Credit scores run from 300 to 850 with the majority of people falling into the 600 or 700 range. Those who fall below 620 are considered a higher risk and if a lender decides to give them a loan they’re going to fall into the subprime loan category.

Subprime loans have higher interest rates than typical loans, but that rate can vary dramatically so if you are a subprime candidate then you must do your homework and shop around for the best loan rates and terms available to you.

Some subprime loans come with prepayment penalties and balloon payments, some even have both. It’s the prepayment penalties and balloon payments that are blamed for contributing if not starting the housing crisis. These penalties are almost impossible to deal with for many people, especially those with bad credit, and many homes ended up in foreclosure.

If you’ve got a poor credit score, rather than diving into a subprime loan which could cause you more trouble in the future, work instead to improve your credit score so you’ll be able to qualify for a traditional mortgage.