California NMLS Test 2025 – 400 Free Practice Questions to Pass the Exam

A subprime mortgage is specifically designed for borrowers who have a less-than-ideal credit history, which typically results in higher interest rates compared to prime loans. Lenders perceive these borrowers as higher risk due to their credit profiles. By charging higher interest rates, lenders aim to compensate for the greater risk of default associated with subprime borrowers.

In contrast, a conventional mortgage usually requires a better credit score and generally offers lower interest rates because it is designed for borrowers considered more creditworthy. A fixed-rate mortgage refers to the structure of the loan where the interest rate remains constant throughout the loan term, regardless of the borrower's credit history. A reverse mortgage is a financial product typically for older homeowners that allows them to convert part of their home equity into cash, and this option is not inherently related to the borrower's credit history in the same way subprime mortgages are.