“AAA Borrowers”
It has yet to be determined if in fact banks are lending, and for those that are, is it truly “business as usual”?? One thing is for certain, and that is rates are dropping fast and potential mortgage applicants are flooding the phone lines searching for the best loan in history.
As congress continues its quest for the second half of the $300+ Billion dollar “TARP” money, and as mortgage rates continue to shatter historic low levels, the question remains:
“WHO IS GETTING THESE RECORD LOW INTEREST RATES AND HOW”??
“The bottom line is, unless you are in the top tier of loan-quality, you are not seeing the best rates in the marketplace”, says Shmuel Shayowitz, President of Approved Funding. Approved Funding is a quarter of a century old mortgage bank headquartered in Bergen County, New Jersey.
Today, the top tier “loan quality” is no longer just described as someone with full income verification or someone with merely an exceptional credit rating. In order to get THE ABSOLUTE BEST mortgage rates in the market, each and every applicant must meet several key factors including credit score, property equity, debt-to-income ratios, and cash reserves.
In March 2008, Fannie Mae and Freddie Mac released a “risked based pricing” tiered system which would add on penalties (“pricing adjustments”) depending on the specifics of a loan profile. According to Shayowitz, “The best rate available in the marketplace today would represent a borrower who has at least 40% equity in their home, and has a FICO credit score of greater than 740.” In addition, the transaction must be for a Single Family primary residence, and must be a purchase mortgage or non cash-out refinance.
Candidates meeting all of those criteria, and qualifying with full income verification, can truly benefit from these historically low rates. That’s not to say that others who fall just shy on some of these items will get a much higher rate, but it will certainly cost “someone” more money to originate that loan.
So as you speak with your family, friends and colleagues and swap stories about what rate their broker or banker was able to obtain for them, be certain that all of these factors of consideration are taken into account in order to truly make an apples-to-apples comparison.
To recap – a “AAA Borrower” must meet the following criteria, in order to get the absolute best rate on a mortgage:
- >=740 FICO credit score
- Single Family home
- Primary Residence (Owner Occupied)
- Loan-to-value of <=60% (ie: 40% equity in your home)
- Purchase or Non Cash-out transaction
BREAKING NEWS: Fannie Mae has released yet another adjustment schedule with signifigantly higher price add-ons for lower tiered FICO and Loan-to-Value borrowers… Although the official effective date is not until April 1, 2009, many banks and lenders have already changed their rate sheets to reflect these increased pricing adjustments. So inspite of lower rate in the marketplace because of Fed mortgage backed security purchasing, some banks may in fact reflect higher rates starting Monday morning!
