It’s a free country, right? Not so much if you have really cruddy credit or spotty income. It doesn’t matter if you can put 50% down or you own your home free and clear but want to unleash some equity in the case of a refinance.
Subprime, nonprime and stated loans are industry terms for borrowers on the outside, not able to qualify for standard mortgages. Examples of outsiders are those with serious credit marks like recent foreclosures and bankruptcies, credit scores under 620, and unstable or irregular income as defined by Fannie Mae or the Federal Housing Administration.
Some of the nasty, deceptive features that accompanied subprime loans were balloon payments, prepayment penalties, rocketing rates after lulling you into accepting the loan through a low starting payment, interest-only payments that caused payment shock after a few years and a predatory amount of upfront points and fees.
If your only hope is qualifying for a subprime loan, the Federal Reserve effectively gave you a scarlet letter seven years ago when it changed the Truth in Lending Act in 2008 requiring a reasonable determination of a borrower’s ability to repay.