Shopping Mortgage Interest Rates With Bad Credit And Low Credit Scores

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This BLOG On Shopping Mortgage Interest Rates With Bad Credit And Low Credit Scores Was PUBLISHED On August 10th, 2020

Shopping Mortgage Interest Rates With Bad Credit And Low Credit Scores

Mortgage Rates recently hit a 3 year low.

In this article, we will discuss and cover the topic of Mortgage Interest Rates.

Shopping Mortgage Interest Rates By Borrowers

Shopping Mortgage Interest Rates By Borrowers

Any borrower with 740 credit scores, no derogatory credit, low debt to income ratio, and lower loan to value will have no problem qualifying for a mortgage.

  • Any lender would love their business. Lenders will offer these type of borrowers the best mortgage rates and terms
  • Shopping mortgage interest rates by these types of borrowers are definitely recommended
  • Lenders will try to give these types of borrowers the best rates and terms to get their business
  • However, Shopping Mortgage Interest Rates by borrowers with under 620 credit scores, outstanding collections/charged-off accounts, and a history of late payments may become a challenge
  • Lower credit score borrowers often get discouraged shopping mortgage interest rates
  • They often are happy that a lender will approve them for the loan
  • However, shopping mortgage interest rates by borrowers with lower credit scores is highly recommended

Always negotiate to get the best mortgage rates.

How Loan Level Pricing Adjustments Affect Mortgage Rates

How Loan Level Pricing Adjustments Affect Mortgage Rates

The borrower’s credit scores have the biggest impact on mortgage rates on government and conventional loans.

  • The loan to value does not matter on government loans due to the government guarantee
  • However, the loan to value does impact mortgage rates on conventional loans
  • There are other factors that impact mortgage rates
  • Factors that impact mortgage rates is referred to as loan level pricing adjustments (LLPA)

LLPA are pricing hits that lenders charge borrowers.

Examples Of LLPAs

Here are examples of Loan Level Pricing Adjustments:

  • Lower credit scores
  • Loan To Value
  • Debt To Income Ratios
  • Manual versus Automated Underwriting
  • Type of property
  • Occupancy
  • The state the property is located
  • Loan amount

A lender can implement any loan level pricing adjustments on a borrower. LLPAs are pricing adjustments for borrowers with higher-risk factors deemed by the lender.

Shopping Mortgage Interest Rates: Buying Down Rates With Discount Points

Discount Points For Borrowers With Low Credit Scores

Lenders can only charge a certain maximum mortgage rate on borrowers.

  • If a borrower has low credit scores and other credit issues and the lender cannot tack on any more Loan Level Pricing Adjustments (LLPA), the lender can charge the borrower discount points
  • 1% discount point is 1% of the outstanding loan balance
  • Borrowers with under 620 credit scores will often get discount points charged
  • Discount Points can be very expensive

Discount Points can be paid with sellers concessions.

Qualifying For Mortgage With A Direct Lender With No Overlays

Qualifying For Mortgage With A Direct Lender With No Overlays

For more information on the contents of this article and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. Over 75% of our borrowers at Gustan Cho Associates are folks who could not qualify at other lenders due to their lender overlays and/or last-minute mortgage loan denial. Gustan Cho Associates Mortgage Group is a national five-star direct lender with no lender overlays on government and conventional loans. Our team is available 7 days a week, evenings, weekends, and holidays.

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