Mortgage rates are interest rates that you pay for your mortgage loan. There are many factors that determine what mortgage rates will be offered to you. Many home mortgage loan borrowers have a tendency in shopping mortgage rates from one lender to another. However, this might not be beneficial if you have less than perfect credit or you have other factors such as high debt to income ratios, self employed income, open collections, prior bankruptcy, prior foreclosure, prior short sale, or prior deed in lieu of foreclosure.
Credit scores and mortgage rates
All mortgage lenders have credit score tiered mortgage rate adjustments. For example, there will be mortgage rates adjustments for the following cut off credit scores as follows:
760 credit scores – no rate adjustment
740 credit scores – 0.25 point rate adjustment
720 credit scores – 0.50 point rate adjustment
700 credit scores – 1.0 point rate adjustment
680 credit scores – 1.75% point rate adjustment
660 credit scores – 2.5% point rate adjustment
640 credit scores – 3.75% point rate adjustment
620 credit scores – 4.5% point rate adjustment
Credit Scores Determines Mortgage Rates
The bottom line here is that the lower your credit scores are, the higher your mortgage rates will be. Credit scores is one of the most looked at factors when a mortgage lender offers you a mortgage rate for your mortgage loan approval. A borrower with higher credit scores will definitely get a better mortgage rate for his mortgage loan.
Rental verification is one of the most important factors in the mortgage approval process. However, the only way to use rental verification is by providing proof of cancelled checks of the past 12 months rental payments. In the event you have paid your land lord cash, it does not count. It needs to be a bank check or other forms of proof like copies of cashiers checks, money orders, or bank wires. A cash paid receipt from your land lord or a letter from your lender does not count as rental verification. If the property you are renting is managed by a licensed professional management company, a letter from the property management company can be used as rental verification.
For those without rental verification, they might be paying higher mortgage rates than those with rental verification. Also, the debt to income ratio for mortgage loan borrowers with no rental verification can be lowered by more than 5% than those with rental verification. Another factor mortgage lenders take into account with those without rental verification is that they are concerned about the borrower’s payment shock where they go from zero rent to a new mortgage payment. Many mortgage lenders will require rental verification in order for them to approve the borrower for a mortgage loan.
Importance Of Verification Of Rent
If you are a renter and are planning on purchasing a new home in the future, make sure you pay your monthly rent by check and be able to provide 12 consecutive months of cancelled checks.
High loan to value and Jumbo Loans
Mortgage rates for Jumbo loans and Portfolio loans such as condotel mortgage loans will normally be higher that regular conventional mortgage rates. Also, the higher your loan to value is the higher your mortgage rates will be. There is a big mortgage rate gap between having a 75% loan to value mortgage loan and a 80% loan to value mortgage loan.