Is this a good interest rate?

Dw4250 · ‎04-02-2016

Mortgage Gurus!

So my fiancee and I did the pre-approval for a mortgage last week (submitted bank and IRA statements; pay stubs; ran credit; etc.). The lender came back with an interest rate of 4.0% and a PMI factor of 0.83. When I asked if there was a possibility of either number going down, they said probably not.

Does this seem high to anyone, or is it basically in line with the going rates? Would it be worth shopping around some more?

Pertinent Infomation:

Combined Income: $160K/year or $13,330/month (before taxes)

Combined debt payments/month (installments and revolving minimum payments): $1600/month

Combined Savings available to go toward DP: $30K

Lowest middle mortgage score (mine): 702

We are looking to put 5% down using a conventional loan (we have to do conventional since my rental property is on an FHA mortgage).

I might be able to goose my score to 720 by paying off a couple of cards, but would that be worth it? I'd rather save the cash if it's going to be minimal change in the rate.

Anonymous · ‎04-02-2016

I priced it out for you and you would be right around the same with me so I would say it's a good rate for conventional. Although you didn't say what the loan size would be. I just used a loan size of 417k. Are either you or your fiance a veteran by any chance? You could get a better rate that way.

Dw4250 · ‎04-02-2016

@Anonymous wrote:
I priced it out for you and you would be right around the same with me so I would say it's a good rate for conventional. Although you didn't say what the loan size would be. I just used a loan size of 417k. Are either you or your fiance a veteran by any chance? You could get a better rate that way.

Yes our price range is $350-425K. I keep seeing ads for 30-yr fixed rates between 3.5-3.75%. And when people on ficoforum post on the "March Closers" or "April Closers", they seem to be getting similar sub 4% rates. Or maybe we would need a 760+ score for this rate?

Is 702 considered a poor score for conventional loans? Would boosting it to 720 make a big difference?

Neither of us are/have been in the military...

Anonymous · ‎04-02-2016

Conventional rates are the most sesitive to credit scores. 740 is kind of the magic number for conventional rates to get the best deal. If your score was 740 you could probably get 3.875%. I haven't really looked at the closers threads but maybe they are VA or FHA loans which will always be lower than conventional.

Your score is great though and 4% is definitely good for a conventional rate right now. On the ads you are seeing read the fine print. It should say what they are basing those rates off of and if you don't fit into that specific box you won't be able to get that rate.

Let me know if you have any other questions.

Anonymous · ‎04-02-2016

Depends on loan and different variables such as LPMI, points, etc...we initially were quoted 3.75 but opted for LPMI due too tax benefit and possibly refinancing within a year or selling in 2 years

Anonymous · ‎04-02-2016

So FYI- your stats are very similar, except for the purchase price, to my boyfriend and mine's. Our mid FICO is 674, and the purchase price a bit higher at 440. We locked in at 4.20 last week. Your score bro g slightly higher, seems like 4.0 with .83 PMI is a good deal!

Dw4250 · ‎04-02-2016

@Anonymous wrote:
Conventional rates are the most sesitive to credit scores. 740 is kind of the magic number for conventional rates to get the best deal. If your score was 740 you could probably get 3.875%. I haven't really looked at the closers threads but maybe they are VA or FHA loans which will always be lower than conventional.

Your score is great though and 4% is definitely good for a conventional rate right now. On the ads you are seeing read the fine print. It should say what they are basing those rates off of and if you don't fit into that specific box you won't be able to get that rate.

Let me know if you have any other questions.

That is reassuring. I'm glad to hear we're getting a fair rate. Running the numbers on my spreadsheet, I don't think it would be worth the effort to try to pull my score up, especially since I don't think I could jump all the way to 740. If the difference would be 3.875 vs 4.0%, I'm better off keeping the cash in savings and using for moving costs, furniture, etc.

Thanks so much for your help!

flan · ‎04-02-2016

@Dw4250 wrote:
@Anonymous wrote:
Conventional rates are the most sesitive to credit scores. 740 is kind of the magic number for conventional rates to get the best deal. If your score was 740 you could probably get 3.875%. I haven't really looked at the closers threads but maybe they are VA or FHA loans which will always be lower than conventional.

Your score is great though and 4% is definitely good for a conventional rate right now. On the ads you are seeing read the fine print. It should say what they are basing those rates off of and if you don't fit into that specific box you won't be able to get that rate.

Let me know if you have any other questions.
That is reassuring. I'm glad to hear we're getting a fair rate. Running the numbers on my spreadsheet, I don't think it would be worth the effort to try to pull my score up, especially since I don't think I could jump all the way to 740. If the difference would be 3.875 vs 4.0%, I'm better off keeping the cash in savings and using for moving costs, furniture, etc.

Thanks so much for your help!

PMI rates are also highly depenent on scores. Getting to 760 would cut the pmi rate in half, give or take a bit.

Also: many (most? all?) pmi insurers will have new rates as of monday. Make sure you've been quoted the new rate. It might be higher; it might be lower. Rates are generally a bit lower, I think, but there's rejiggering on score cut offs, which means that you might be in a lower score tier than you were on Friday.

Talk to your lender, they can tell you all that, and you can figure out if its worth working on scores or not.

Anonymous · ‎04-05-2016

In addition, consider buying points to reduce the interest rate. While my loan is much smaller than yours (200k) I was able to secure a rate well below 4%.

Anonymous · ‎04-06-2016

That's pretty par for the course. Getting to 740 should get you in the 3.75-3.875% range. At 5% down, PMI drops to ~0.59 at 740 and ~0.41 at 760.