When is taking out a subprime loan to buy a house most likely to be a

QUESTION

When is taking out a subprime loan to buy a house most likely to be a reasonable financial decision?

A) Qualifying for a conventional loan is impossible.
B) Owning a home is an important life goal for the borrower.
C) Adjustable rates are likely to be higher than fixed rates.
D) The borrower reasonably expects to have greater financial means in the near future.
E) The previous owner of the house took out a subprime loan.

ANSWER

Answer: D
Explanation: D) Can a subprime loan ever be a good idea? Sure. If you need a subprime loan because you can’t qualify for a conventional one, then you’re probably a high-risk buyer. But if you’re about to come into more money in the near future, Choice D, then it might be worth getting a bad rate now if you reasonably think you’ll be able to afford it later. Choice A: Not being able to get a regular loan doesn’t mean that a subprime loan is a good idea. Maybe you really can’t afford it. Choice B: Wanting a house desperately isn’t a reason to take out a high-interest loan. Choices C and E tell us nothing about the buyer and his or her ability to pay.