Weekly Rate & Update 10-28-16
Question: Is it worth it for us to try to increase our credit score?
Answer: Probably.
After the mortgage and housing market meltdowns one of the first adjustments made by Fannie Mae and Freddie Mac was to increase the number of tiers in pricing adjustments for credit scores.
What do I mean by “tiers in pricing adjustments?”
As part of our series on how mortgages work in August/September we covered the teeter-totter relationship between rates and costs and also tiered pricing. Different factors in a loan have different prices for the same rate. Credit score pricing has more tiers than other factors, and the higher your score the lower the price for the same rate.
There are seven tiers for pricing based on the borrower’s credit score from low score of 620 to scores that are 740 or higher. The tiers have a change in price every 20 points and if you can increase your score enough you could move two or more tiers—which depending on other factors could lower your rate up to 0.25%.
So it can definitely benefit you to increase your credit score if it can lower your interest rate. The next question is, how can I increase my score?
There are several factors that go into your credit score and depending on what is impacting your score it may be possible to increase your credit score in a short period of time. For many borrowers paying down and/or closing some credit accounts is the fastest way to increase your score, for others getting creditors reporting delinquent payments to remove those delinquencies from their credit reporting.
Another question you may ask is if the time it may take you to increase your score is worth the risk of losing the home you want to purchase that is on the market now or perhaps interest rates going resulting in the same, or possibly worse, rate you could get today? The answer depends on the potential score increase, the benefit in terms of price and or rate to you and the time it would take to have the changes made to your credit report needed to obtain the score you are shooting for.
Every situation is different and just paying off some cards or closing others may not impact your score or impact it enough to better your cost or rate. When I run a credit report for clients I analyze the report and the scores and provide some guidance on if it is possible to easily increase scores and what it may take for the scores to increase.
When buying or refinancing your home your credit score is a very important element to the rate and cost of your loan, if it makes sense to increase your score we’ll help you.
Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.
This morning the very important 3rd quarter Gross Domestic Product data was released. The report announced 2.9% annualized growth in the 3rd quarter GDP, more than double the 2nd quarter’s 1.4% growth. It was the biggest 3rd quarter growth in two years. Strength was in personal consumption and exports. The report should be a negative for mortgage rates but so far investors have shrugged off the positive news and Mortgage Backed Securities (MBS, which determine interest rates) are flat following the new.
Rates for Friday October 28, 2016: Some upward pressure on rates this week that flexed rates a bit but at the end of the week all of our rates are the same as last Friday. The speculation amongst the investor set is that when the Fed raises rates in December (notice: when not if) it will be a 0.5% bump instead of the previously anticipated 0.25% increase in the Fed Funds rate. I remind you that increases in the Fed rate do not directly correlate to increases in mortgage rates as those are solely dependent on the activity in the Mortgage Back Securities markets which track closely to the government bond markets. Lock ‘em when you got ‘em.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Flat
30 year high-balance conforming 3.50% Flat
30 year FHA 3.25% *** Flat
30 year FHA high-balance 3.25% *** Flat
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have may have no points and credit towards closing costs, changes daily.
Historic times in the upper Midwest with the Cubs and Indians going at it for the World Series. I have no dog in the fight and hope mainly for seven really close games—so far oh for two in that regard. As well that games are decided by fantastic plays by the players and not the result of an error or blown call from the umps. Whoever wins it will be fun to see the winning city release decades, or for Cubbies fans century plus, of pent up excitement about winning the oldest championship in American sports.
Have fun on Monday night passing out your candy to the little super heroes, princesses and pop stars!
Dennis
