Prime

AAA

DEFINITION of 'Prime'

A classification of borrowers, rates or holdings in the lending market that are considered to be of high quality. This classification is placed on those borrowers that are deemed to be the most credit-worthy and the prime rate is the rate that a lender will lend to its high quality borrowers.

INVESTOPEDIA EXPLAINS 'Prime'

Lenders use a credit scoring system to determine which loans a borrower may qualify. A major variable in this credit scoring system is a borrower's FICO score (which may range from 300 to 850). In general a borrower with a FICO score greater than 620 is considered to be eligible for a prime loan; however, other variables, such as past payment history, bankruptcy, foreclosure and the loan-to-value ratio are also considered.

Since a lender's incentives are not always aligned with a borrower's incentives, it is important for consumers to shop for the best loan at the best rate.

RELATED TERMS
  1. Prime Of Prime - PoP

    A brokerage that provides service to traders (especially Forex ...
  2. Conforming Loan

    A mortgage that is equal to or less than the dollar amount established ...
  3. Conventional Mortgage

    A type of mortgage in which the underlying terms and conditions ...
  4. Fannie Mae - Federal National Mortgage ...

    A government-sponsored enterprise (GSE) that was created in 1938 ...
  5. Freddie Mac - Federal Home Loan ...

    A stockholder-owned, government-sponsored enterprise (GSE) chartered ...
  6. Prime Rate

    The interest rate that commercial banks charge their most credit-worthy ...
Related Articles
  1. Credit & Loans

    4 Steps To Attaining A Mortgage

    It starts with knowing your choices as well as your price range. We show you how to get there.
  2. Insurance

    ARMed And Dangerous

    In a climate of rising interest rates, having an adjustable-rate mortgage can be risky.
  3. Credit & Loans

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  4. Retirement

    How To Invest When You're Deep In Debt

    Debt is one of the biggest obstacles that prevents people from investing - but it shouldn't be.
  5. Credit & Loans

    Mortgage Points: What's The Point?

    Learn how to pay less for your home in the long run, or save in the short run.
  6. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  7. Budgeting

    Mortgages: How Much Can You Afford?

    Answering this means number-crunching as well as factoring in other considerations and expenses.
  8. Home & Auto

    The Benefits Of Mortgage Repayment

    Buying a home may be the biggest debt you'll ever incur. Learn why you should retire it sooner, rather than later.
  9. Home & Auto

    When (And When Not) To Refinance Your Mortgage

    There are both good and bad reasons to refinance. Learn more about both here.
  10. Home & Auto

    Option ARMs: American Dream Or Mortgage Nightmare?

    Option adjustable rate mortgages could make or break your home-buying experience.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center