Which prime are you?

Are all sub-prime borrowers, no good, dirty, deadbeats? The term ‘sub-prime' applies to a huge section of borrowers, and sometimes the majority of borrowers in some markets. As Lew Sichelman (LA Times, syndicated author) puts it, a "certain number shouldn't have been approved for a mortgage at any price". Referring of course to the increased media attention placed on the sub prime market of late.

The Mortgage Banker's Association says its difficult to define a sub-prime borrower, but admits that if you (as a borrower) have trouble coming up with one of your mortgage payments this year, you're sub-prime. Though, the association has said that 78% of you sub-prim(ers) are actually making your payments on time and are staying current on your mortgage. There is no avoiding the fact that sub-prime loans have a higher default rate, which is expected to increase in the near future.

In his recent article Lew has categorized the following list of borrower types as sub-prime;

Former Primes: borrower's who have suffered a major life event that has affected their financial position.

Future Primes: Those who have had mistakes in the past, take on higher interest rates or credit repair loans and promise to make payments on time, to once again reach their ‘prime' status.

Rookies: (My favorite kind) These are people who just don't have the funds for a large down payment but, meet or exceed every other qualification necessary for obtaining good terms on a loan.

Second Homers: These are borrowers who were able to qualify for a prime market loan for their first home, but didn't have the credit to qualify for similar mortgage status on their investment or vacation homes. Its estimated that this borrower only makes up 7% of the sub-prime market.

Fraudsters: There isn't much to say about these guys, other than they're crooks.

Ne'er-do-wells: Borrowers with messy financials, rarely pay on time, their approval's were just dumb.

Should Haves: These are folks who really are in the ‘prime' market but for one reason or another have chosen a sub-prime loan. (my experience is that these are the one's whom although, that are able to... they just don't want to put down a huge down-payment..

So which sub-prime borrower are you?