Which mortgage type is typically more expensive in terms of interest rates?

Subprime mortgages are typically more expensive in terms of interest rates because they are designed for borrowers with lower credit scores or a limited credit history. Lenders consider these borrowers to be higher risk, which leads them to charge higher interest rates as a means of compensating for that risk. The increased cost is a reflection of the potential that borrowers may default on their loans due to financial instability or insufficient creditworthiness.

In contrast, conventional mortgages usually offer competitive rates to borrowers with good credit. FHA and VA mortgages are often more affordable and provide benefits such as lower down payments and government backing, which help mitigate risk for lenders, thus leading to lower interest rates compared to subprime loans. As a result, while other types of mortgages are structured to support various borrower profiles, subprime mortgages tend to carry the highest costs in terms of interest rates.