You Don’t Always Need a High Credit Score to Get a Great Rate

You Don’t Always Need a High Credit Score to Get a Great Rate

February 4, 2019
Buyers don’t necessarily need an 800-plus FICO credit score to get the best rate on a mortgage. Depending on the market, some buyers with a 700 FICO score could get nearly as an attractive mortgage rate as an applicant with an 800-plus score, according to a new analysis for the Washington Post completed by LendingTree. The analysis was based on more than 1 million actual loan offers during 2018.
Lenders turn to FICO scores—which range from 300 to 850—to assess a borrower’s risk. The general rule of thumb has always been that the higher the applicant’s score, the less the risk of default, and therefore, the lower the interest rate the lender would charge.
For example, as of last week, a score of at least 760 on a $300,000 fixed-rate 30-year mortgage could get an average mortgage quote of 4.14 percent. But a borrower with a credit score of 620 would get a 5.73 percent rate quote for the same amount..
However, the differences are getting less pronounced. According to the analysis, borrowers last year making a 5 percent down payment with a credit score in the 670–679 range received mortgage rate offers averaging 5.2 percent. However, borrowers with scores above 800 making the same 5 percent down payment received offers averaging 4.78 percent—a much smaller spread than in the past. The analysis found similar smaller gaps between high and low credit scorers who had down payments of 20 and 25 percent as well.
“Although scores and down payments are indeed crucial risk components that factor into a lender’s offer, market conditions and competition also can affect the size of rate benefits to lower-FICO borrowers compared with high-FICO borrowers,” writes Ken Harney, a national real estate syndicated columnist for The Washington Post. “In actual application situations, lenders who want to increase their loan business to home buyers may dig deeper into the credit pool and offer relatively more attractive rate deals to people whose scores are not pristine.”
Indeed, Tendayi Kapfidze, LendingTree’s chief economist, told The Washington Post that this was likely due to a more challenging market for lenders in 2018 as demand for refinancings shrunk. They looked to be more competitive to attract more home purchase applications.
Source: https://magazine.realtor/daily-news/2019/02/04/you-don-t-always-need-a-high-credit-score-to-get-a-great-rate

Source: 
“Your FICO Score Doesn’t Always Preordain Your Mortgage Chances,” The Washington Post (Jan. 30, 2019)

Popular posts from this blog

Advice Young Adults Need to Avoid Buyer’s Remorse

Advice Young Adults Need to Avoid Buyer’s Remorse March 4, 2019 Most young adults have financial regrets about their home purchase, a new Bankrate survey shows, but much of their grief could have been avoided with proper planning. That’s where you come in: Younger buyers have a need for more professional guidance about the costs of homeownership. Sixty-three percent of millennial homeowners—more than any other generation—expressed buyer’s remorse, most often pertaining to closing costs, home maintenance, and other hidden expenses, according to the survey of more than 2,000 consumers. “When you buy a house, you can’t call the maintenance company or a landlord to fix major issues; it’s all on you,” says Luis Rosa, a financial planner in Henderson, Nev. Extra expenses, such as needing a new air conditioner, furnace, or water heater, often catch first-time buyers by surprise, Rosa adds. “I always advise home buyers to create savings buckets and open a savings account
Read more

Housing Slowdown Doesn’t Scare First-Time Buyers

Housing Slowdown Doesn’t Scare First-Time Buyers March 4, 2019 Despite recent declines in home sales, sluggish growth in single-family home construction, and mounting affordability concerns, first-time buyers are outperforming other segments of the market, according to a new report released by Genworth Mortgage Insurance. “The first-time home buyer market has been more resilient during the [housing] slowdown compared to repeat buyers,” writes Tian Liu, chief economist at Genworth Mortgage Insurance. About 482,000 first-time buyers purchased homes in the fourth quarter of 2018. Though that’s 3 percent lower than a year ago, it bests the 7 percent year-over-year decline in repeat buyer activity, according to the report. “This is a reminder that first-time home buyers differ from other buyer groups in terms of why they buy,” Liu notes. “Their purchase decisions are more likely driven by the fact that many are starting families and reaching peak homebuying ages. Even
Read more

What Buyers Should Ask After a Home Inspection

What Buyers Should Ask After a Home Inspection October 9, 2018 You are here Home News and Commentary Daily News What Buyers Should Ask After a Home Inspection Share Facebook Twitter LinkedIn Print October 9, 2018 After an inspector has finished a home report, buyers may feel overwhelmed by any flaws that might have been found. That’s why it’s important they take the opportunity to learn more so that they can move forward confidently in the transaction. A recent article at realtor.com® recommends home buyers ask their inspector clarifying questions like: “I don’t understand this; what does it mean?” or “Is this a major or minor problem?” and “Do I need to call in another expert for a follow-up?” Home inspectors are bound to uncover something in a home; no home is perfect. But the majority of the problems they uncover will likely be minor. Have the home inspector clarify which problems fall within the “minor” or “major” categories. Keep in mind: “The inspector can't tel
Read more