Once again, there is some re-pricing of risk going on.  If you have recently applied for a loan, you may notice that you’re rate is higher than the ‘going rate’ you’re seeing in less than honest ad’s.  Fannie Mae has made the decision to increase the rates on what they consider higher risk loans.  As I’ve mentioned in recent posts, we’re beginning to see a lot of credit score driven adjustments. 

If you have less than a 720 credit score, you will have an adjustment against the ‘base rate’ that you’d qualify for.  I can almost promise that the longer you wait to get a loan, the larger these adjustments will get.  All of these adjustments were determined on extremely complicated statistics and analysis, so don’t get too mad.  Obviously, Fannie Mae believes these loans have a better chance of not performing (meaning they are more likely to end up in foreclosure).

You’ll find Fannie Mae’s announcement at their website. 

So what does this mean to you, the customer? 

Quick scenario: Let’s say you’re buying a home for $300,000 and you’re financing 90%.  You have a 660 credit score, you have the income and assets to qualify for the loan.

Here is an example before the loan level price adjustment took place (Before):

• $270,000 Loan
• 30 Year Fixed Amortization
• 6% Rate
• $1618.79 per month (principal and interest)

Here is an example after the loan level price adjustment took place (Now):

• $270,000 Loan
• 30 Year Fixed Amortization
• 6.25% Rate
• $1,662.44 per month (principal and interest)

A difference of $44 more each month!  As you can see with the adjustments, rates could be seriously worse if your credit score is below 660. 

If you need help determining how these changes effect you, or how to improve your credit score to qualify for a better rate – please let me know.  I’d be glad to help!