Subprime mortgages are home loans that are taken out by those with a credit score that is below average and may be a credit risk. Borrowers with this type of mortgage typically have credit scores below 640 and demonstrate other negative information in their credit reports such as high debt-to-income ratios, past foreclosures and defaults or bankruptcy within the previous seven years.

The interest rate associated with a subprime mortgage is usually higher than traditional mortgages in order to compensate lenders for taking the risk that the borrower will default on the loan. In addition to high-interest rates, subprime mortgages often come with added fees and the borrower is sometimes subject to predatory lending practices to further secure the loan.

The 2008 financial crisis was widely attributed to the proliferation of subprime mortgages which were granted to unqualified buyers in the years prior to the meltdown. As a result of irresponsible lending practices, new regulations and restrictions have been placed upon the subprime mortgages with a focus on proper underwriting and affordability.

Subprime mortgages are not inherently bad or risky; rather, it is important for borrowers to understand the caveats that come along with taking out a mortgage with a below average credit score. Borrowers must be aware of high interest rates coupled with other hidden costs and should also be sure to do their due diligence to protect themselves from any predatory lenders.

If you are looking to obtain a subprime mortgage, its important to be clear about your rights and obligations under the loan. Additionally, research the lender thoroughly and make sure you are aware of all the terms and conditions of the loan. With the proper research and understanding of the risks involved, a subprime mortgage can be a viable option for those with below average credit history.