Think you have good credit? Better think again.
01/13/2008
What has previously been thought of as a decent credit score is about to change. At least from a mortgage application perspective. I've asked PREB (Poconos Real Estate Blog) Guest Author, Andy Williams, to explain the details.
The days of unethical sales practices by some of the less-reputable mortgage representatives are numbered as the home financing market gets another dose of reality. Practices such as less than full disclosure about the cost of loans through the hiding of fees and rate manipulation have been very common in the past. Hopefully this most recent change will make this 'sales tactic' much harder to pull off and level the playing field a bit. Consumers should find it easier to compare apples to apples and spot the rotten ones more easily and earlier on in the process. This way they can direct their business back toward the good guys like Andy where it belongs. - L
From the Desk of:
The days of unethical sales practices by some of the less-reputable mortgage representatives are numbered as the home financing market gets another dose of reality. Practices such as less than full disclosure about the cost of loans through the hiding of fees and rate manipulation have been very common in the past. Hopefully this most recent change will make this 'sales tactic' much harder to pull off and level the playing field a bit. Consumers should find it easier to compare apples to apples and spot the rotten ones more easily and earlier on in the process. This way they can direct their business back toward the good guys like Andy where it belongs. - L
From the Desk of:
Abacus Regional Mortgage
NEW FANNIE MAE LOAN-LEVEL PRICING
All Fannie Mae lenders will be changing to tiered pricing. Some have already changed and others will follow by the 2nd quarter of 2008. The tiered pricing effects borrowers with credit scores below 680. The pricing refers to the points charged by a lender. If a borr
ower has a score lower
than 680, the pricing will be roughly as follows:
< 620 +2.0 points
620-660 +1.75 points
661-679 + .75 points
Remember, 1 point equals 1% of the mortgage amount, so on a $200,000 mortgage for a borrower with a credit score of 650, the loan could cost $3,500 more.
If the borrower doesn't have the money to pay the points, they can opt to pay a higher interest rate to absorb the cost of the points. The cost of .5 in price equates to roughly .125% in interest rate. For example, if they score a 619, the 2.0 pt. add-on may be absorbed into the interest rate by adding .5% to the interest rate. If the going rate is 6.25%, adding .5% would increase the rate to 6.75%.
This may only effect the Fannie Mae lenders, with the local banks still not charging any sort of surcharges for credit scores lower than 680. We will have to wait and see how this all plays out.
Now more than ever it is important to choose your mortgage broker very carefully. I am proud to offer proven market expertise and I am dedicated to helping you determine what loan is right for you. Call me for the straight answers. - Andy
NEW FANNIE MAE LOAN-LEVEL PRICING
All Fannie Mae lenders will be changing to tiered pricing. Some have already changed and others will follow by the 2nd quarter of 2008. The tiered pricing effects borrowers with credit scores below 680. The pricing refers to the points charged by a lender. If a borr
ower has a score lower
than 680, the pricing will be roughly as follows:< 620 +2.0 points
620-660 +1.75 points
661-679 + .75 points
Remember, 1 point equals 1% of the mortgage amount, so on a $200,000 mortgage for a borrower with a credit score of 650, the loan could cost $3,500 more.
If the borrower doesn't have the money to pay the points, they can opt to pay a higher interest rate to absorb the cost of the points. The cost of .5 in price equates to roughly .125% in interest rate. For example, if they score a 619, the 2.0 pt. add-on may be absorbed into the interest rate by adding .5% to the interest rate. If the going rate is 6.25%, adding .5% would increase the rate to 6.75%.
This may only effect the Fannie Mae lenders, with the local banks still not charging any sort of surcharges for credit scores lower than 680. We will have to wait and see how this all plays out.
Now more than ever it is important to choose your mortgage broker very carefully. I am proud to offer proven market expertise and I am dedicated to helping you determine what loan is right for you. Call me for the straight answers. - Andy
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