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How To Tell If If Your Loan Is Prime or Sub-Prime

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Sub-prime Mortgage: for borrowers with weaker credit histories.

Prime Mortgage: for borrowers with stronger credit histories, usually with a credit score above 620.

The main difference between prime and sub-prime loans is your risk profile as a borrower. Your risk “grade” is decided by your credit history (did you pay bills on time?), your credit score, and how much you have saved for a down payment. If you don’t have enough documentation of income or records, this can also lead to a sub-prime loan.

You won’t necessarily know which kind you’re being offered. But here are some ways that can help you tell the difference:

 
Subprime
Prime
Interest rates

Usually pays 200 – 300 points higher than prime. It depends on your credit history, credit score and down payment size.

  
Term of loan
More likely to be adjustable-rate (ARM)
Can be fixed- or adjustable-rate. More often fixed-rate.
Credit score
Under 620
Over 620
Penalties
More likely to have a pre-payment penalty
  
Other features
Often has a balloon payment
  

 People  you can call or visit for help:

  • Consumer Credit Counseling Services: (800) 251-2227
  • HUD Counseling: (800) 569-4287
  • NeighborWorks: (888) 995-HOPE

 

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