The lending industry is changing
As you may or may not know, the interest rates just dropped below 6%. As of Tuesday, they were at 5.75%, a rate we haven’t seen in about 2 years. With that said, there’s no certainly as to whether that rate will stay, or if we’ll see the fluctuations we’ve seen in the past. But that’s an awesome interest rate if you’re shopping. That means you’re able to afford more home now, with the lower rate.
On top of that, we’ve just been informed that as of January 9th, the structure of the lending industry will be changing. As you may know there have been many “issues” with lenders going out of business, people going into foreclosure because they can’t pay their mortgage, etc. Because of this, many changes have been instituted within the lending industry. One of those is the 0% down or 100% financing programs. Now those programs are virtually non-existent. In rare cases if you’ve got spotless credit a lender may be able to work you into one of these programs, but for all practical purposes, they’re gone.
More importantly, I wanted to let you know about the specific change which takes place on January 9th. At that time we're told the mortgage industry will put into effect a tier system for mortgage rates. What that means is your rate will be determined by what your credit score is. There are no exceptions, where your score falls determines what you will pay as an interest rate. What that means is if you’ve got a lower credit score, you’re going to pay the “normal” rate, plus a percentage penalty.
This is the tier system they’re instituting.
BELOW 620 +.75% - +1.00%
620-639 +.625% - +.75%
640-659 +.375% - + .50%
660-679 +.25% - +.375%
That means if you have a credit score of 660, you’re going to pay the current interest rate of 5.75%, plus an additional 0.25%. So your rate is now 6%. That rate increase will affect what you can afford as well as what your payments will be. They’re also looking at putting private mortgage insurance (PMI) on one of these tier systems also. PMI is required if you have less than 20% down. So if you’ve got a less than perfect credit score, you’ll now be paying more for your interest rate, AND you’ll be paying more for PMI.
If you're thinking about purchasing, it's a good idea to talk to a lender soon, to see how these changes are going to affect you. As always, if can help in any way, please don't hesitate to contact me.
On top of that, we’ve just been informed that as of January 9th, the structure of the lending industry will be changing. As you may know there have been many “issues” with lenders going out of business, people going into foreclosure because they can’t pay their mortgage, etc. Because of this, many changes have been instituted within the lending industry. One of those is the 0% down or 100% financing programs. Now those programs are virtually non-existent. In rare cases if you’ve got spotless credit a lender may be able to work you into one of these programs, but for all practical purposes, they’re gone.
More importantly, I wanted to let you know about the specific change which takes place on January 9th. At that time we're told the mortgage industry will put into effect a tier system for mortgage rates. What that means is your rate will be determined by what your credit score is. There are no exceptions, where your score falls determines what you will pay as an interest rate. What that means is if you’ve got a lower credit score, you’re going to pay the “normal” rate, plus a percentage penalty.
This is the tier system they’re instituting.
BELOW 620 +.75% - +1.00%
620-639 +.625% - +.75%
640-659 +.375% - + .50%
660-679 +.25% - +.375%
That means if you have a credit score of 660, you’re going to pay the current interest rate of 5.75%, plus an additional 0.25%. So your rate is now 6%. That rate increase will affect what you can afford as well as what your payments will be. They’re also looking at putting private mortgage insurance (PMI) on one of these tier systems also. PMI is required if you have less than 20% down. So if you’ve got a less than perfect credit score, you’ll now be paying more for your interest rate, AND you’ll be paying more for PMI.
If you're thinking about purchasing, it's a good idea to talk to a lender soon, to see how these changes are going to affect you. As always, if can help in any way, please don't hesitate to contact me.
Labels: mortgages
posted by Brittany Nigh at 4:30 PM
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