A subprime mortgage is defined as a loan given to customers with poor credit histories who would normally not qualify for a conventional mortgage. “Most subprime loans had adjustable interest rates, with a low initial interest rate (often called ”teaser rates”) that would later rise in a process known as mortgage reset” (Bigio). As the values of homes rose in the real estate market more customers were applying for mortgage and buying homes increasing the overall economic profit from the market. The U.S. ownership rate increased from 64 % in 1994 to an all-time high peak of 69.2 % in 2004. (Business) Now that the housing market was a boom, many borrowers(AKW) wished to invest money into the market but, many of these customers while they might have had a clean credit history they(erase this word) lived in a low income household and could not cover their mortgages, forcing them to take out more loans therefore, creating more debt. Lending money to those with low income or those who have poor credit is not the smartest business chose(right word?) so lenders simply create a higher interest-rate 's to try and compensate for the greater risks
A subprime mortgage is defined as a loan given to customers with poor credit histories who would normally not qualify for a conventional mortgage. “Most subprime loans had adjustable interest rates, with a low initial interest rate (often called ”teaser rates”) that would later rise in a process known as mortgage reset” (Bigio). As the values of homes rose in the real estate market more customers were applying for mortgage and buying homes increasing the overall economic profit from the market. The U.S. ownership rate increased from 64 % in 1994 to an all-time high peak of 69.2 % in 2004. (Business) Now that the housing market was a boom, many borrowers(AKW) wished to invest money into the market but, many of these customers while they might have had a clean credit history they(erase this word) lived in a low income household and could not cover their mortgages, forcing them to take out more loans therefore, creating more debt. Lending money to those with low income or those who have poor credit is not the smartest business chose(right word?) so lenders simply create a higher interest-rate 's to try and compensate for the greater risks