@iamrayl wrote:
Hello,
I have been a member of these forums for a number of years and the information gained has been very helpful to me over the years. I decided a few weeks ago that I would stop delaying the purchase of my first home and finally submitted preapproval applications to two lenders earlier this week. I pay a monthly subscription for equifax credit monitoring which gives me daily access to my equifax score and access to the TU and EXP scores at a cost. I wanted to have an idea of what my scores looked like before applying.
So here is my dilemna. I was approved by both lenders for conventional loans (5% or 0% down no MI) but the interest rates seemed rather high (5% and 5.375%) and 6% with the 0% down. Based on the estimates they sent me, my monthly payments would still be cheaper than an FHA mortgage due to the mortgage insurance premium. Both lenders told me this was the best they could do because interest rates had went up on 7/31 and my middle score came in at 719, and had it been 1 point higher I could've qualified for a lower rate. One lender said they would pull my credit and do a rapid rescore once I submitted a formal contract and before I locked in any rate and the other said they do not pull credit reports until after 120 days have passed. So my question is....should I wait it out for a few more months to improve my tri merge scores by paying my cards down some more (currently at 10% util) and waiting for a bunch of inquiries fall off in October and November (I purchased a car 2 years ago and have about 8 inquiries due to fall off by November 1) or should I proceed with the homebuying process based on these preapprovals? The lender that does not do rapid rescoring is my preferred lender (credit union). Appreciate your advice.
Woah!!! We are in the middle of underwriting right now. There is a big red flag here.
When the lender thought our credit midscore was 703 (that's the same tier as your 719 once you hit 720 you are in the next tier) he told us our rate would be 4.625% with 5% down and our MI upfront would be 6200. When we went to a lender for a 2nd opinion he said our rate should have been 4.325% or 4.5%.
Have you ever heard of a lender's credit? Where you let them give you a higher interest rate and they give you money towards your costs like closing costs?
The 2nd lender told us that there is a par rate. It is like the prime rate for each tier of credit score that gets decided by the banks each day. If you pay extra at closing then you can buy yourself a lower rate, or if you need money for closing costs you can take a higher rate and they would give you a lender credit that would cover closing costs. Or in this case MI.
What our first lender had done is he had tacked the mortgage insurance on top of our loan AND he raised our rate to give us a lender credit to cover the cost of mortgage insurance. He was double dipping us, presumably for a bigger payoff for himself from the loan.
So on our 200k loan with 10k down our 1st lender was saying we would be borrowing 196200, and we would also be getting charged a higher rate on top of it. (Where did the lenders credit run off to I wonder)
In reality our midscore was 727 and a 4.625% rate would have paid our MI upfront and our loan balance would have still been 190k. Or we could opt to pay the MI monthly and our payment would be a little higher but once we pay off enough we can get the MI dropped but our rate will always be 4.25%
You should ask them for a good faith estimate on those amounts. That interest rate seems way too high for your credit score and the fact that you said you have no MI leads me to believe that they are adjusting your rate to give you a lender credit for the MI upfront.
Monthly MI for your credit tier is 140ish/mon, for the 720 tier it is 98/mon (I don't know if these are different for different regions.) When we were planning to go FHA our MI would have been 200/mon AND we would have had to pay an upfront MI. Different things to consider if you want to bump that 1 pt to get the better tier.
