What is essential to know about subprime mortgages?

Subprime mortgages are specifically tailored for borrowers who are considered higher-risk, often due to factors such as a poor credit history, limited income, or other financial challenges that may make it difficult for them to qualify for traditional prime loans. These loans allow higher-risk individuals access to mortgage financing despite their creditworthiness, but they typically come with certain trade-offs, such as increased interest rates compared to prime loans.

Understanding that subprime mortgages target these particular borrowers is crucial for grasping the broader implications of their use in the mortgage lending landscape. It highlights the importance of risk assessment in lending practices and reflects the responses lenders have to varying borrower profiles.