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What Are Prime Mortgage Loans?

what are sub prime loans

Prime mortgages are given to those with good credit and sufficient income levels.


Prime mortgage loans are offered by lenders to their best customers. They feature interest rates at least as low as the current prime rate offered by the Federal Reserve to banks. Some prime mortgages, though, feature rates considerably lower than that rate. These loans almost always require down payments on the part of borrowers, which may be as much as 20 percent of the home's sale price, although 10 percent is more common.


Most mortgages are either prime or sub-prime in character. A fixed-rate prime mortgage is the most common type of home loan. Its interest rate is stable over the life of the loan. Adjustable rate mortgages (ARMs),

although no longer widely used, can also be prime in character. ARMs feature initial low interest rates that adjust upwards or downwards at periodic intervals, based on movements in the prime interest rate.



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