Humber/Ontario Real Estate Course 4 Exam Practice

Which market should a borrower with a poor credit score approach for a mortgage?

1. Primary market

2. Merchant banking market

3. Sub-prime market

4. Secondary market

5. Equity market

6. Prime market

The correct answer is: Sub-prime market

A borrower with a poor credit score should approach the sub-prime market for a mortgage because this market is specifically designed to cater to individuals who may not qualify for traditional financing due to factors such as a low credit score, limited credit history, or higher debt-to-income ratios. Sub-prime lenders are more willing to take on higher risks associated with these borrowers, although this often comes with higher interest rates and less favorable terms compared to prime lending options. In contrast, the primary market generally includes conventional lenders who offer loans to borrowers with good credit profiles, making it less accessible for those with poor credit. The secondary market involves buying and selling existing mortgages, which does not directly involve borrowers seeking new loans. The equity market typically refers to raising funds through stock issuance and is not related to mortgage financing. Merchant banking and prime markets are also not tailored for individuals with sub-standard credit ratings, as they focus on more creditworthy borrowers and sophisticated financial products. Thus, the sub-prime market is the most suitable choice for borrowers with poor credit scores.