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Do I Have A Prime Loan Or A Subprime Loan?
“I’M
CONFUSED AS TO WHAT TYPE OF LOAN I HAVE. I THINK I HAVE A SUBPRIME LOAN,
BUT I’M NOT SO SURE. HOW CAN I TELL? WHAT’S THE DIFFERENCE BETWEEN A
PRIME LOAN AND A SUBPRIME LOAN ANYWAY?”
With
subprime loans in the national news spotlight, many borrowers are
wondering the same thing—especially those who took out their current
loan several years ago. To answer your question in simple terms, you
may have a subprime loan if your loan had a fixed rate for the first two
years (or less) or else your loan had a “teaser” rate that adjusted
upwards following your first payment. In general, subprime loans
have substantially higher start rates, shorter terms, prepayment
penalties, and in many cases require larger down payments. However,
while most subprime loans are indeed interest-only, that doesn’t mean
you have a subprime loan. For example, an interest-only 5-year ARM with
a 0%, 5%, or 10% down payment isn’t a subprime loan in most cases. Also,
if your credit score was above 620 when you applied for your current
loan, you more than likely have a prime loan rather than a subprime
loan. Finally, if you were able to get a second trust you probably don’t
have a subprime loan either. If you’re still confused about what type of
loan you have, consult with mortgage professional. ∆
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