What defines a subprime mortgage?

A subprime mortgage is specifically designed for borrowers who have lower credit scores and may have a more challenging financial history. This type of mortgage is typically offered to individuals who do not qualify for prime mortgages, which are reserved for borrowers with excellent credit. Subprime mortgages often come with higher interest rates to mitigate the lender's risk associated with lending to someone who has a higher likelihood of defaulting.

This understanding is critical as it highlights the target demographic for subprime loans and how they differ fundamentally from other types of mortgages. In contrast to options that refer to excellent credit, fixed-rate mortgages with large down payments, or government-backed loans, a subprime mortgage's primary characteristic is its accessibility to those with less-than-ideal credit profiles. This makes the option indicating that subprime mortgages are offered to borrowers with lower credit scores the correct choice.