Saturday, March 14, 2009

Who is Getting Those Low Mortgage Rates?

The Washington Post features an analysis of who is getting those advertised 5.5% interest rate mortgage rates. Here are some of the requirements stated in the piece:
  • 20 percent down;
  • borrow $417,000 or less;
  • boast a high credit score (730 to 750, out of 850 total, as determined by your credit history);
  • carry low debt relative to your reliable income (confirmed by two years' worth of tax returns and probably not counting bonuses);
  • buy in an area where home prices are relatively stable (wherever that is);
  • and use a community bank, not a national bank.
The article goes on to state that all the "exotic" loans from the bubble years are gone, including stated income (where you don't provide documentation of your income), pick-your-payment mortgages (where one month you can pay interest only), 100 percent mortgages (where the lender provides both the first and second mortgage).

Most lenders in declining markets like California, Florida and Nevada are not only requiring a minimum of 10 to 15 percent down, but a minimum credit score of 720 as well.
Fannie Mae and Freddie Mac add a quarter-point "adverse market delivery charge" because of declining home prices. They have also initiated "risk-based pricing," which raises fees on people with less than a perfect borrowing profile. You will pay more if your credit score falls below about 720, you are buying a condominium or you are putting less down than 15 percent.
However, if you are a veteran or farmer, there is some good news for you. The Department of Veterans Affairs and Agriculture Department loans in rural are still offering loans with zero down and no PMI (mortgage insurance).

Read the entire Washington Post article here.

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