furr2ball Posted February 4, 2005 Report Share Posted February 4, 2005 How does a lender weigh factors other than credit score, ( which I am diligently attempting to repair).Length of residence, 28 yearsno derog mortgage history.length of employment, same employer, 29 yrs.New home $380,000 cash down $80,000. Good LTVGood debt ratio.If my assumptions are correct, doesn't all of the above get you some kind of loan. But the credit score moves the rate and quality of terms? Link to comment Share on other sites More sharing options...
firstsource Posted February 4, 2005 Report Share Posted February 4, 2005 You are totally correct. All of those items mentioned are called compensating factors, so you will probably be able to get a mortgage, the scores are the indication of what rate you will pay.With 20% down, you can have as low as 500 score and get a loan, with 30% down, you can get a loan with as low as a 470 score.Charles Link to comment Share on other sites More sharing options...
furr2ball Posted February 5, 2005 Author Report Share Posted February 5, 2005 Ok, so I can get a loan. With the above info, what Fico score range will I need to get a rate under 6%. Will I need to be in the 700s ?What about buying down the rate, will it help with lenders consideration in regards to the base rate?Thanks in advance for all of your help, these boards are Great!! Link to comment Share on other sites More sharing options...
Jazz4Cash Posted February 5, 2005 Report Share Posted February 5, 2005 So it looks to me like the credit score becomes rationale for a higher rate?Doesn't seem fair to the consumer. I always get the impression they only care about the score and it doesn't matter if the score is low due to things beyond your control. Link to comment Share on other sites More sharing options...
amortgageman Posted February 5, 2005 Report Share Posted February 5, 2005 With the above info, what Fico score range will I need to get a rate under 6%. Will I need to be in the 700s ?Generally, 620 credit score is required for conventional financing, but there are other compensating factors. One big factor which can get you an approval is assets. If you have a retirement account that can be included or maybe some of that $80,000 left over, that could sway the underwriting engine to accept a lower score. The AU is looking for good payment history, collections less than $2,000 (will need to be paid), and debt to income ratio, among other things. Freddie Mac is very much asset driven while Fannie Mae is more credit score driven.If the collections, unpaid judgments, etc are a problem, then you are in a nonprime situation, and looking more in the low 6% range on a thirty year fixed. It would be best to get any type of chargeoffs and deragatory paid off to get the best rates. There are many more opprtunities with adjustable rate subprime with 20% down payment that will pull you below 6%, but you would need to pay for the broker services on the front end of the loan so that the broker/lender does not have to charge yield spread to get paid.What about buying down the rate, will it help with lenders consideration in regards to the base rate? Yes it is possible to buy down the interest rate. Most of the nonprime lenders will let you buy down the rate up to 0.5%, while the charges vary from lender to lender at a ratio of 2:1 or 3:1. At 3:1, you would need to pay 1 1/2% additional points to buy the rate down. Conforming lenders will also allow you to buy down the rate as well, so if the borrower wanted to and the lender has the pricing available, it is conceivable to get a conforming loan below 5% on a thirty year fixed rate right now.Next comes the decision as to whether or not buying the rate down is worth the money. Thsi al depends on the savings per month on the mortgage and the cost to buy the rate down. You will definitely want to stay in the home long enough to recuperate the savings.For example, let's assume a 5.5% rate at par, and a 5% rate costing 2 points on your loan amount of $300,000. The payment at 5.5% would be approximately $1,704.00/mo At 5%, the paymnet would be approximately $1,602.00/mo. You would realize a savings of $102.00/mo at 5% vs. 5.5%. The cost to do so is 2 points or 2% of your loan amount. This would be $6,000.00 . Now, $6,000.00 / $102.00 = appproximately 60 months to break even. If you plan on staying in the home for more than 60 months, then this may be an option for you, but anytime less in the home, would not make sense. (One other small note, is a lwer interest rate does apply more to principal in the earlier years of the mortgage, and their will be savings there, but in the long run, things will eventually balance out (meaning both loans will pay in full at 30 years)). Link to comment Share on other sites More sharing options...
Recommended Posts