Credit scores and mortgage rate adjustments
The lower your credit scores are the higher your mortgage rates will be. Mortgage rate adjustments are rate adjustments either added to the rate or discounted to mortgage rates. For conventional loans, there are credit score tiers starting at 620 FICO, 640 FICO, 660 FICO, 680 FICO, 700 FICO, 720 FICO, 740 FICO, and 760 FICO.
Credit Scores And Mortgage Rates
Each level of these credit score tiers have different mortgage rate adjustments. For example, top par mortgage rates will be a available for a prime borrower with credit score of 760 FICO or higher. That borrower can have conventional rates of 4.25%. As the borrowers credit scores are lower, their mortgage rates will get higher due to mortgage rate adjustments. On this example, a conventional mortgage loan borrower with a credit score of 620 FICO can only qualify for a conventional mortgage rate of 5.75% and as much as 2 points for the same loan just because they have lower credit scores. Credit and credit scores are so important when it comes to mortgage qualification and getting the best possible rates.
Loan to value and mortgage rate adjustments
Another common mortgage rate adjustments that can penalize a mortgage loan borrower is when it comes to loan to value on conventional loans. For example, you can have 97% loan to value, 95% loan to value, 80% loan to value, 75% loan to value, and 70% loan to value conventional mortgage loans. The lower your loan to value, the less your mortgage rate adjustments are. A mortgage loan borrower who puts down 5% will get better mortgage rates than a mortgage loan borrower that put only a 3% down payment. A person who puts down 25% down payment on a home purchase will get far less mortgage rate adjustments than someone who puts down 20% on a home purchase.
Single family versus multi unit
Someone who purchases a two to four unit residential property will get hit with mortgage rate adjustments and will definitely get a higher mortgage rate than someone who purchases a single family home. The mortgage rate adjustments can be quite steep, sometimes as much as a full percentage point.
Certain states have mortgage rate adjustments
Certain mortgage lenders will give a positive or negative mortgage rate adjustments if you are in certain states. Depending on the lender, there might be a lender that can give you a 0.25% mortgage rate adjustments credit if you live in certain states. On the flipside, you can get penalized a certain percentage amount if you reside in certain states. For example, a certain lender may hit a mortgage loan borrower 0.625% in mortgage rate adjustments if the mortgage loan borrower lives in certain states.