🗯Buyer/Borrower: what affects my interest rate? .
💬Johennys Leiva: 1) Every score belongs to a tier that varies from lender to lender as a risk grade. So yes although you have a 580, you may qualify for a loan approval BUT your interest rate will reflect a high risk negative adjustment. Whereas someone with a 640 will have less of an adjustment, someone with a 680 a better rate and someone over 720 may see a credit adjustment for optimal rate.
2) you can have a 740 credit score BUT have had a bankruptcy, foreclosure, short sale or deed in lieu of foreclosure and it will affect your rate negatively and require special program.
2) In my opinion the very best program available is through the VA. Excellent rates, 0% down, va guaranteed, no mortgage insurance. The next best program is conventional rates are slightly higher, mortgage insurance is credit driven but it can be removed with time and equity. FHA is a program designed to allow as many people to become homeowners as possible with an important caveat - if you come in with 3.5% down, your rate will vary but your PMI is a permanent fixture. All programs have pros and cons - your rate will be indicative of YOUR personal risk assessment.
4) loan terms usually go 10 year, 15 year, 20 year and 30 years respectively. There are others of course but for this example I’m going with fixed rates. If you are willing to repay the loan faster - the lender sees less risk and rewards you or negatively reflects it on the rate.
5) NOT ALL PROPERTIES ARE CREATED EQUAL. A condo is subject to high risk. Much higher than say a single family home. So there will be stricter guidelines as well as rate adjustments.
6) of you come in with 3.5% down versus 20% down - there will be rate adjustments
Even when you put 5% or 10% there are adjustments to both your rate and your pmi. Loans with 20% down have no PMI. On FHA loans with a higher down payment the MIP is no longer necessarily for the life of the loan. Because there is less risk of default when you have more skin in the game.