Ringing in the new year will be a present from Fannie Mae and Freddie Mac to borrowers with credit scores under 680. Here is what these borrowers on conventional loans with Loan-to-values over 70% will receive on either purchases or refinances:
Credit score less than 620: Either a 2 discount point sur-charge or a higher rate of approximately ¾%
620-639: 1.75 discount point charge or higher rate of approximately 5/8%
640-659: 1.25 discount point charge or higher rate of approx. ½%
660-679: .75 discount point charge or higher rate of approx. ¼%
These changes will typically become effective in January. What it means to you is that lenders will not be able to determine the interest rate until they receive the borrower’s credit report if they are anywhere close to 680. If there are joint applicants, the lower of the two applicant’s middle scores will be the one that determines the interest rate….. So, theoretically, a borrower could be quoted a rate of 6.0% prior to loan app and end up with a 6.75% rate because their middle credit score was 619.
Rate swings: This week has been a pendulum for mortgage rates. Monday rates were virtually touching 5.5% on the 30 year fixed, the lowest we have seen in a few years. Things started reversing , turning back up about an 1/8%. We had further movement up today as they are back up to the 5.875-6.0% level. So the window of opportunity has closed for now, but perhaps the market overreacted again and will settle back down. Congratulations to those of you who made the decision to lock your rate in !
A Minus Loans: These loans are available at Opteum to borrowers with scores as low as 575 on purchases up to 95-100% LTV. Cash assets are needed to offset the low credit scores and can help someone with low scores, few trade lines and without even a rent history purchase a new home. I like to call this type of program “the New Sub-Prime”.
I will be working this weekend if you need me.
222 Chastain Meadows Court, Suite 300