Changes to the mortgage industry continue to create confusion for those shopping for the best mortgages in the market place. Most of the changes are coming from the largest money center banks that end up servicing the lion’s share of the nation’s mortgages through tightening underwriting guidelines. In addition, Governments from all levels feel compelled to “do something about it” in order to protect their citizens by creating legislation that may or may not help in the long run.
What is risk based pricing?
As the true cost of the mortgage meltdown is exposed, mortgage rates are now based on the varying levels of risk to the lender. I feel that mortgages, now more than ever have become a custom product for each specific client. The rate offered will depend on credit scores, down payment, debt-to-income ratios, mortgage program, etc. Just a year ago, the spread between the rates being offered to the most qualified clients and the clients with less down payment, lower credit scores and higher debt-to-income ratio’s is widening. Your credit score can drastically affect the mortgage rate that you are offered.
What is your credit score?
Conforming Loan adjustments:
- 720+ allows the most flexible programs and best rates with no pricing adjustments
- 680 – 719 requires up to .50 additional points that may affect the rate being offered.
- 660 – 679 required up to 1.25 additional points that will affect the rate being offered.
- 640 – 659 requires up to 1.75 additional points that will affect the rate being offered.
- 620 – 639 required up to 2.50 additional points that will affect the rate being offered.
FHA Loan Adjustments:
- 600 + No pricing adjustments
- 580 – 599 require .50 additional points that may affect the rate being offered
- 530 – 579 require 1.50 additional points that will affect the rate being offered
- Bellow 530 requires 3.00 additional points that will affect the rate being offered and this adjustment applies to borrowers with no credit score.
The lending game has changed and prudent planning will help secure the best possible loan in any given situation. Create a good mortgage plan that will guarantee success. Do not wait until the last minute.
Jim Hogan is the LOANSOURCE and available to address your questions or concerns and extends this service offer to anyone you know that need to create a mortgage plan. Call direct at 404-870-2348.
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