Subprime loans were initially aimed at people with weak credit. But by 2005 and 2006, lenders encouraged many types of better-off borrowers to take such loans, including people with large incomes who chose to speculate on the real estate market.
But many subprime loans were made to refinance lower income borrowers who already owned homes, which often loaded them up with more mortgage debt than they realistically could manage and creating a risk of foreclosure.
Today there are very few lenders with loan products aimed at the subprime borrower, but they do exist and the lending criteria required by those lenders are far stricter than in years past. I’m sure we’ll see the day over the next few years where many lenders announce subprime loan products, but for now we’ll have to wait for the market dust to settle and confidence to rise once again.
Once again, the Feds dropped interest rates another 0.75% today.
The summer of 2005 saw the dreams of hundreds of thousands of American people destroyed when Hurricanes Katrina and Rita hit the Gulf Coast. These hurricanes destroyed homes, stole lives and wiped out entire communities in Alabama, Louisiana and Mississippi.
Everyone would be a millionaire if real estate investing were 100% risk free. No one would have any reason not to invest. Only those real estate investors who are not afraid to face risks and know how to deal with them will be successful in real estate investing. If you want this to be you, take a little time to learn the risks involved with investing in real estate.
