What's up with sub-prime loans?

Do I need a sub-prime loan? Will I still be able to buy a house? Are these questions you've been asking yourself?

Did you see the heart attack the stock market experienced last month around subprime loan problems? So many people, including myself before, sat there staring at the TV wondering, "what is a sub-prime loan?" The answer is very simple, it's a loan other than prime. "WOW! Thanks for the tip Sarge!!" I know, I know, it sounded like a rather dumb answer huh? Well, sub-prime loans are given to folks that don't qualify for a prime loan. People who have bad credit, or maybe not very good credit, people who don't have money for down payments, etc. A lot of times these loans are made to people who shouldn't really have a home loan. Many more sub-prime loans go into default than prime loans. Because of this sub-prime lenders usually have higher marketing costs due to unaccepted applications, defaults, etc. Sub-prime loans usually come with higher interest rates, fee's, and expenses when closing on such a loan to help the lender recoup some of it's losses.

Unfortunately too many sub-prime loans have went into default lately which has caused an accordion effect throughout the stock markets sub-prime lenders. Causing some of them to even stop taking applications and possibly looking at future bankruptcy. This caused a ripple effect in the mortgage lending community and even got the federal reserves attention. Some experts believe that the fed will lower interest rates in the future. Which means, if they lower rates on the money they loan banks then banks can lower rates on the money they loan us. In short, it's a good thing for those of us who don't have sub-prime loan problems.

So will the sub-prime loan crisis affect you getting a loan? Yea, a little bit. The loan requirements are becoming more stringent on the mortgage brokers and banks alike. But if you have good credit and qualified for a prime loan before you should be ok now. But please, don't take my word for it, consult an expert in the mortgage field. I'm a Realtor remember?

As a side note before I leave you; do you think when you buy a house it's really yours? If so, try and not make, say about, 3 payments, then see who really owns the house? Not you! The mortgage company. Don't' know what that has to do with anything here but I just wanted to share that.

Thanks for your time.