Interest Rates: One Man’s Gain is Another’s Loss

Posted: Sep 01, 2008 | Comments: 0 | Views: 85 | Bookmark and Share

In the old days, you used to be able to call a lender, give them a note amount and term, and get a quote.  Lickety split.  Not a lot of questions.  Just “boom”, there’s your answer. It certainly made interest rate comparison much easier.  But in today’s mortgage lending world, it’s just not that easy. 

In fact, say you’ve got two customers buying identical homes in a development.  Each customer can be quoted completely different interest rates for different reasons.  Even if they have the same credit score.  That’s because you’re granted different discounts or assessed with different cost additions for various aspects of your lending profile. 

For instance, one guy may be getting a conventional loan, and the other an FHA (Federal Housing Administration) loan.  With FHA and a credit score of 620, there are no discounts or additions for credit score that a lender will add to the total price.  But, dip below a 620 and there will be quite a pricing differential.  With a conventional loan, you’ll get discounts the higher your credit score.  Thus, a 620 credit score in the conventional realm does not have as much interest rate muscle as a 720.  And there are different cost hits in between for every 19 point differential. Plus, if you have less than a 620, you probably won’t get conventional approval.  A typical lender nowadays has to be really good at reading a chart to quote a loan in the conventional world. 

Another big factor is loan size.  Again, you’ll probably pick up a discount if you’ve got a healthy sized loan.  However, if you’re financing a smaller amount, it may cost you a bit.  Thank goodness for excellent first time homebuyer programs that let qualified borrowers avoid some of these pricing hits. 

Another big difference in interest rates available is the buyer’s intention for the property.  If it’s a primary residence or a second home, one gets a better rate than if it’s an investment property.  From an underwriting perspective, a borrower is less likely to quit paying a mortgage for a property that is intended for personal use.  Statistics have proven this aspect of lending to be quite true.  Of course, if it is an investment property, the borrower is going to have to come up with a heck of a lot more money out of pocket anyway.  If it’s a manufactured home, you have to reconsider loan programs again.  Some programs aren’t available for manufactured homes, and especially if it is a manufactured home that is an investment property. You’ll have to find a lender that specializes in this type of loan.

As touched on before, the type of loan matters, too.  Conventional rates are different than FHA rates, which are different than VA rates, which are different than Rural Housing rates.  Even for the same house.  And again, as mentioned before, throw THDA or another first time housing program into the equation, and you start all over again. Of course, you can’t get a VA loan if you’re not a veteran or the spouse of one buying a loan. And you can’t get a rural housing loan if you’re in the wrong zip code and make too much money. So, at times, your choices are limited for you.

Even if you get the same interest rate, it doesn’t necessarily mean your payment will be the same.  If your loan requires mortgage insurance, your monthly premium could differ because of your credit profile. 

I guess the best advice is to be patient when considering loan programs and payments.  Make sure you explore all your options.  And don’t worry about the guy sitting next you.  Just keep your eyes open and work with a lender that’s trustworthy. 

(ArticlesBase SC #543916)

Rate this Article
  • 1
  • 2
  • 3
  • 4
  • 5
  • 0 vote(s)
    Feedback
    RSS
    Print
    Email
    Re-Publish

    Source:  http://www.articlesbase.com/mortgage-articles/interest-rates-one-mans-gain-is-anothers-loss-543916.html

    Article Tags:

    Credit Score

    ,

    lending

    ,

    Credit Reports

    ,

    interest rates

    ,

    Fha

    ,

    home loan financing

    ,

    mortgage specialist

    ,

    Kristin Abouelata

    ,

    Federal Housing Administration

    ,

    Home Loan Plain Talk

    New Student Loan Rates

    If you qualify, Stafford rates are dropping. Even if you don't, they are still a good deal. (01:16)

    New Student Loan Rules

    Interest rates have changed. Here's the low-down on what you'll pay now. (01:35)

    How to Repay Student Loans - Part 16

    How to reduce student loans quickly - How do interest rates affect student loans? (00:56)

    Consolidate Student Loans

    After graduation, students who have several loans can consolidate them. Is this a good idea? (01:04)

    How to Get a Car Loan

    You're monthly payment looks as good as that shiny new car. But are you driving into debt? (02:06)

    It takes time, after filing bankruptcy, to be able to buy a mortgage, it's not even a real consideration for two years. However, during that time, you can work on building credit for a mortgage after bankruptcy so that you'll be able to get the best deal possible.

    By: Jennifer Quilter l Finance > Mortgage l Feb 09, 2010 l Views: 1
    Hector Milla

    Homeowners are typically receiving loan modification approvals in 90 days. This fast turn around rate is prompting more individuals to enter into this type of mortgage relief program.

    By: Hector Milla l Finance > Mortgage l Feb 09, 2010 l Views: 2

    There are many different types of mortgages, each with its own advantages and disadvantages, it is very important that you do your research. Understanding these differences will enable you to choose the right mortgage for your financial situation and housing goals.

    By: Golden Years Mortgage Solutions l Finance > Mortgage l Feb 09, 2010

    The concept behind a reverse mortgage is simple, it enables senior to take the equity in their homes and convert it into cash. This concept is sometimes referred to as "The loan that pays you" A reverse mortgage does not require borrowers to make any payments to the lender until he or she sells the home or passes away.

    By: Golden Years Mortgage Solutions l Finance > Mortgage l Feb 09, 2010
    Hector Milla

    To find a reliable and reputable Loan Modification Company should not be that hard to do.

    By: Hector Milla l Finance > Mortgage l Feb 09, 2010 l Views: 1
    Hector Milla

    Does loan modification hurt your credit ratings? Well, that depends on a few factors... The first thing you want to think about is your past payments, have they all been on time or did you fall behind every once in a while?

    By: Hector Milla l Finance > Mortgage l Feb 09, 2010 l Views: 1
    Hector Milla

    Unless the only negative item that you have on your credit report is the mortgage that has fallen behind your credit rating will not be fixed by modifying your loan.

    By: Hector Milla l Finance > Mortgage l Feb 09, 2010 l Views: 1
    Hector Milla

    The answer to this question is simple. No. To opt for a modification to your loan and look for a program that will help you getting through the payments you are still struggling to finish will not hurt your credit at all.

    By: Hector Milla l Finance > Mortgage l Feb 09, 2010 l Views: 1
    Kristin Abouelata - Home Loans

    When exploring your options regarding a mortgage, people often overlook the most basic consideration. How long do you want to make payments?

    By: Kristin Abouelata - Home Loans l Finance > Mortgage l Dec 01, 2008 l Views: 19
    Kristin Abouelata - Home Loans

    When buying a home, most people only concern themselves with the interest rate and the type of loan they are getting. However, the loan to value may be another aspect to take into consideration.

    By: Kristin Abouelata - Home Loans l Finance > Mortgage l Dec 01, 2008 l Views: 201
    Kristin Abouelata - Home Loans

    When you apply for a mortgage these days, lending institutions gather enough information on you to form an independent DNA sample (not really, but you get the picture). What steps should these organizations take to protect you from identity theft?

    By: Kristin Abouelata - Home Loans l Finance > Mortgage l Oct 22, 2008 l Views: 28
    Kristin Abouelata - Home Loans

    When applying for a loan, a mortgage lender cares more about your past than your future. And sometimes, a lender cares more about your past than the present……

    By: Kristin Abouelata - Home Loans l Finance > Mortgage l Oct 08, 2008 l Views: 193
    Kristin Abouelata - Home Loans

    How can two borrowers can buy the same house, and get completely different interest rates? There are multiple considerations to take into account when a lender is pricing an interest rate for a customer……

    By: Kristin Abouelata - Home Loans l Finance > Mortgage l Sep 01, 2008 l Views: 85
    Kristin Abouelata - Home Loans

    The Housing Assistance Tax Act, which is a section of the recently passed Housing and Economic Recovery Act, provides some incentives to put the residential housing market back on it’s feet. Are you in a position to take advantage of them?

    By: Kristin Abouelata - Home Loans l Finance > Mortgage l Sep 01, 2008 l Views: 347 l Comments: 1
    Kristin Abouelata - Home Loans

    The rates for jumbo loans (loans above $417,000) have caused somewhat of a glut in the real estate market of higher end homes. What’s caused these rates to stay steadily higher while rates for traditional loan sizes have seen record lows in the past months?

    By: Kristin Abouelata - Home Loans l Finance > Mortgage l Aug 04, 2008 l Views: 63
    Kristin Abouelata - Home Loans

    Coming up with a down payment or money for closing costs for a home loan can be a challenge these days. What extra money you were setting aside may all of sudden be going toward your gas tank or your grocery bill. To obtain your dream of homeownership, it may be time to accept that gift from Mom and Dad………

    By: Kristin Abouelata - Home Loans l Finance > Mortgage l Jul 22, 2008 l Views: 596

    Add new Comment

     
    * Required fields
    Author Box
    Articles Categories
    All Categories
    0