Because "subprime" is another word for "non conforming" financing anything that does not conform to Government Sponsored Entities (GSE's) lending guidelines, such as those for FNMA and FMHLC, fall into this category. Although credit may be the first indicator to some how a loan is underwritten or graded, other important factors play part too, such as loan amount. The FNMA conforming loan limit for 2006 is $417,000. If your property is in California where the average home value could be as high as $490,000, you will never be able to qualify for conforming financing without splitting the loan into two balances, thus splitting up the risk for the investors. Loans over the conforming loan limits are commonly called "jumbo" and "super-jumbo" loans, and sometimes even "luxury" home loans. All of these types of loans fit into lending perimeters of non-conforming and subprime financing, sometimes also referred to as "niche" lending.

Sometimes the subprime market will offer up better interest rates for a borrowers unique situation, than could be achieved applying for a mortgage with a prime (AAA) lender, Even if the borrower is not considered to be subprime.

There is a wide range when it comes to the interest rates of sub prime lenders. It is your mortgage brokers job to shop your loan to multiple sub prime lenders and obtain the best deal for you. Most sub prime loans are written as 2 or 3 year ARMS.

Subprime loans are also referred to as nonconforming loans, because they do not conform to standards set forth by Fannie Mae or Freddie Mac, the two largest purchasers of mortgage backed securities.

There are many different sub-prime programs available. There is much more flexibility on documentation required. A good example is a VOR (Verification of Rent), may not be required using certain subprime lenders. This makes it easy to finance someone that can't verify their rental history. There are many more examples of subprime programs!