by 
The Curious Bag
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Both FHA and conventional mortgage loans have regulations that require a borrower to have a credit score of 620 and above, as of early 2010. Borrowers with credit scores lower than that are sent to the almost non-existent subprime lending market.
Significance
A borrower's credit score is the numerical indicator of his ability and willingness to repay old, current and future debts. The lower the borrower's score, the less likely a lender is willing to lend him new funds.
Function
Subprime loans allow borrowers with low credit scores to purchase a home at very high interest rates. This allows a borrower to purchase a home and work on his credit rating at the same time.
Types
Subprime loans can be short or long term, ranging from 10 to 40 years. A borrower can receive a fixed or variable interest rate.
Considerations
Credit counseling or cleanup could help a borrower get a better loan, but it will take some time. Paying off old debts and lowering credit card balances are the easiest ways to quickly raise your score.
Benefits
Subprime loans can be good for a borrower, if used correctly. A buyer should educate himself on the pros and cons of a subprime loan before purchasing one, to make sure he does not get a bad mortgage product.
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