I bought my three credit scores and they are excellent. My wife and I are recently out of college and can afford a mortgage in our target range, but we don't have a large down payment... we've got excellent credit but no downpayment. It would take quite a while to get a large down payment. We can have a few thousand for closing costs, first mortgage, or even a downpayment if the seller pays closings costs (happening a lot where I am now).
I spoke to Bank of America yesterday and they quoted us an 80/20, but both rates were a full percentage higher than we see on myfico.com and bankrate.com for rates we could qualify for. Instead of upper 5's and low 6's, they had our 80% a full percent higher at 7% and the 20% second mortgage at 7.5%. I know the second will be slightly higher, but I was expecting closer to 6% for the 80 and 6.5% for the 20. Is the only way to get the rates shown on these sites and the rates in the newspapers as national averages to have a full 20% to put down?
If so, why does credit score even matter? We've done well to keep high scores throughout college and since we've been married, we just had some debts to pay off and it would take years to make enough for a 10% or 20% down payment. We'd rent for a while, but it costs the same or more than mortgages!
Basically, is the only way to get the best rates (5.75-6.25) to have a large down payment? Or will some other mortgage banker or broker see the good credit score and not jack up the rate full percentage point just because the down payment isn't large?
I think you need to shop around but shopping around need...
I think you need to shop around but shopping around need to be done in a short period of time as the FICO will recognize it as one inquiry. Those rates seem a little high to me and you don't necessarily have to use the bank you bank with.
Thanks for the input. They seemed about a percentage poin...
Thanks for the input. They seemed about a percentage point higher than we anticipated. I can understand a slight increase from maybe a 'best' rate of 5.8 to 6 percent because of low or no down payment, but a full point was odd to me.
I just bought my FICO scores...... so that will count as an inquiry. Does that mean that if mortgage companies do inquiries within the next 2 weeks they will all count as one inquiry? Or does that mean there will be 2 inquiries... one from myself and one from the collection of mortgage companies? I'd rather not do that if it will create 2 inquiries (and damage the score) since we don't plan to buy until around June/July, but if my score purchases and mortgage inquiries will count as one inquiry we'll go ahead and shop around. EDIT- When we talked to BOA, they didn't pull our credit, they just went by the scores we told them we got when we bought the scores the day before. So as of now, the only inquiry is ours to purchase the credit scores.
Typically the credit scoring models recognize that you ar...
Typically the credit scoring models recognize that you are going to shop for the best rate on a mortgage so having lenders pull your credit won't affect your score. I prefer going to a bank/direct lender because it's just them pulling your report rather than going to ABC Broker and having them shop your credit report around to a bunch of different lenders. The other factor in rates is how much are you willing to pay for your rate? If the market is dictating 6.5%, you can get 5.75% but you are going to have to pay money at closing (discount points) in order to get that rate.
Think of the pricing on a mortgage as basically a risk meter. The higher the risk to the lender, the higher your interest rate will be. A high credit score is just the beginning. Lenders are also going to look at:
Down Payment amount. The more skin you have in the game, the more you have to lose and the more secure the lender feels that you won't just walk away if you can't afford the payment.
Liquid assets - Do you have money to pay your mortgage in case of some type of emergency. Most lenders require at least 2 months.
Income and job history - Can you document enough income to afford the payments? If not you may have to state your income which carries nore risk for the lender.
The rates posted at most banks are for the perfect scenario. Great credit, 20% down payment, money in the bank. If you note also, often times the bank will post that it is tgoing to cost you 2 points to get that rate. Hope this helps.