2016 Mortgage Rate Factors with regards to your loan can depend on many variables like the credit/FICO score of the borrower as well as the type of property the loan is for. In terms of Conventional Loans another factor that is taken into consideration is loan-to-value ratio or LTV. However if you were looking to get an FHA, VA, or USDA loan LTV doesn’t affect the mortgage rate because these loans are insured so in the event the borrower defaults, there is a safety net so to speak. With government sponsored entities Fannie Mae and Freddie Mac, these two organizations regulate conventional or conforming loans. Conventional loans however are NOT insured by Fannie Mae and Freddie Mac, so in the event your LTV isn’t at least 80%, you will be required to have private mortgage insurance or PMI. FHA loans that do not have at least an 80% LTV ratio will require the borrower to pay upfront mortgage insurance premium (MIP) as well as a monthly premium for the life of the loan or until it is refinanced with an LTV less than 80%. VA loans do not require a monthly insurance premium, however, they do have an upfront MIP that can be rolled into the loan. Finally USDA loans do not have any insurance premiums on them at all.
Conventional loans by far have the most volatility and correlation between credit score and subsequent mortgage rate. According to 2016 Mortgage Rate Factors in order for a borrower to get the best possible Conventional Loan Mortgage Rate the borrower needs to put at least 25% down and also have a FICO score of 740+. The lower the FICO score and less amount of down payment, the higher the rate will be on the conventional loan product.
2016 Mortgage Rate Factors for FHA, VA, and USDA loans have a lot less importance put on credit FICO scores. As mentioned earlier, since these loans are insured by a governmental agency, there isn’t a need to increase mortgage rates as drastically as conventional loans. Since there is a security against default, mortgage rates can stay low while having a lower FICO score and down payment, if any. When comparing an FHA loan to a Conventional Loan, a 740 FICO is required by the conventional loan for the best rate, whereas a 680 FICO will get you the best rate on a FHA loan. If he FHA borrower is below a FICO score of 640, they will then begin to see an increase of mortgage rate versus their FICO score.
Most borrowers believe that 2016 Mortgage Rate Factors are influenced by bad credit, prior bankruptcies, or foreclosures. In some scenarios this may not be the case necessarily. Mortgage lenders only use the borrower’s credit score to determine mortgage rates with the exception being conventional loans which also takes LTV into their calculation. Prior negative marks on their credit like: bankruptcy, late payments, charge-off accounts, foreclosure, short sale, or deed-in-lieu of foreclosure will not have an impact on the mortgage rate as credit score is used. Gone are the days where lenders can charge higher interest rates for prior credit history and these days this practice is illegal.
2016 Mortgage Rate Factors take into account the type of property and type of loan you choose when determining the mortgage rate. For example, a single-family home will have a lower interest rate than say a condominium or a multi-unit residence. Also, mortgage rates on a second home or investment property will also carry higher mortgage rates as well. 2016 Mortgage Rate Factors says for an FHA 203k rehab loan, this will have a higher interest rate than a standard FHA loan due to the fact a rehab loan is a riskier investment than an FHA loan to purchase a home. Finally, Jumbo loans will have even higher interest rates because these are loans that exceed the limits of conventional loans and are also deemed risky as well.
As you can see there are many different factors that go in to determining the mortgage rate you will receive as a borrower. If you are looking for a loan officer who can help navigate these waters, please call me any time at 888-900-1020, email me directly at email@example.com, or inquire through my website www.loanconsultants.org.