Factors That Impact Mortgage Rates On Home Loans

This BLOG On Factors That Impact Mortgage Rates On Home Loans Was PUBLISHED On June 28th, 2019

What Are Factors That Impact Mortgage Rates:

• Many first time home buyers, veteran seasoned home buyers, and homeowners shop for the best mortgage rates available from different lenders
• The best mortgage rates from mortgage lenders are only offered to mortgage loan applicants with the best credit scores
• Conventional loans are credit sensitive where to get the best available mortgage rates, the mortgage loan applicant needs to have a credit score of higher than 740
• The minimum credit score required to qualify for a conventional loan is a credit score of 620
• A 620 credit score is considered a bad credit score for conventional lenders
• It is often classified as a higher risk borrower
• A mortgage loan applicant with a 620 credit score will more than likely get a high-interest rate
• Those with a 620 credit score can shop all they want
• The chances are that they will get quoted a higher rate by lenders and many mortgage lenders will not even offer a conventional loan with a 620 FICO
• Many lenders will have their own lender overlays and set a minimum conventional loan credit score requirements

Lenders often charge higher mortgage rates for conventional borrowers with under 700 credit scores.

Factors That Impact Mortgage Rates With FHA Loans

FHA loans are different.

• FHA loan applicants with credit scores under 600 FICO will definitely get quoted a higher interest rate
• Those with credit scores between 600 and 620 will be charged a slightly lower rate than those with credit scores of under 600 and 620
• Borrowers with 640 scores will get slightly better rates

To get the best available FHA rates, a borrower should have a credit score of higher than 680 FICO.

Will Prior Bankruptcies Be Factors That Impact Mortgage Rates?

A prior bankruptcy will have no impact on your mortgage rates.

• Whether you are applying for an FHA loan, VA loan, USDA loan, or conventional loan, a prior bankruptcy does not affect the mortgage loan borrower’s mortgage rates
• A prior bankruptcy will affect a mortgage loan applicant’s credit scores which a lower credit score will affect mortgage rates

The lower your credit score, the higher the risk you are under the eyes of the lender and the higher the rates.

Will Prior Foreclosure, Deed In Lieu, Or Short Sale Be Factors That Impact Mortgage Rates?

As in the previous example, a prior foreclosure, a prior deed in lieu of foreclosure, or a prior short sale will have no impact whatsoever on your mortgage rates, no matter what mortgage loan program you choose: FHA loans, VA loans, USDA loans, or Conforming loans.  However, a prior foreclosure, deed in lieu of foreclosure, or short sale will affect your credit scores which in turn will affect your mortgage rates.  Lower credit scores are deemed higher risk borrowers which means higher mortgage rates.

Are Property Types Factors That Impact Mortgage Rates?

The type of property a home buyer purchases does affect mortgage rates.

• A condominium home buyer will get a higher mortgage rate than a buyer of a single-family home
• This is because lenders classify a condominium higher risk than a single family home
• The higher the risk, the higher the mortgage rates
• A multi-unit property will get quoted a higher mortgage rate than a single family home
• A  second home will get quoted a higher mortgage rate than a single-family home
• This is because it is classified as a higher risk than a single family home

Yet, investment home interest rates will be higher than a second home. This is because mortgage lenders believe if things go financially wrong with the homeowner, they are less likely to default on their primary and second homes than their investment property.

Are Credit Scores Factors That Impact Mortgage Rates?

Credit scores are the biggest factor in determining your mortgage rates.  The higher your credit score, the lower your mortgage rates.  Lenders view higher credit score borrowers as less likely to default on their mortgage loan due to their timely payment history and pattern of managing their money.  If you need a quote for the best mortgage rate and need a pre-approval, apply now by completing our 4-page mortgage application by clicking APPLY NOW.  We will get back to you once you complete the application.  The Team at Gustan Cho Associates are available 7 days a week, holidays included.

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