What Determines Your Mortgage Rate?

Posted on September 23, 2009

Mortgage rates have fallen in a big way this year!  Many of you have already refinanced and others are trying to take advantage of the $8000 Tax Credit for First Time Home Buyers.  While rates don't sit at their lows for the year at the moment, they are still very good.  For the most part rates are 4.75% - 5.5% on most products.  Why the range?  Well I want to educate you a bit on what goes into a rate quote and why yours may be different from someone else's. 

First, your overall credit score is critical in getting the best possible rate. Keep in mind that on a joint application we will use the lower of the two middle scores. For example; borrower A has scores of 708, 804, and 790 but the co-borrower has scores of 620, 608 and 595. We will use the 608 score for qualifying purposes. It is crucial to structure the loan the "right way" from the beginning to ensure you get the best possible product and rate.

Second, the loan-to value or (ltv) is also an important factor in determining your rate. For instance, a borrower putting 20% down will get a better rate than someone who is requesting a 95% loan. 

Third, your overall "financial portfolio" will help determine whether or not you get the best possible rate. What do I mean by this? Individuals who have savings accounts, investment accounts, 401K money and a low debt-to-income ratio or (dti) are putting themselves in a better position to qualify for a lower rate than someone who does not have the above.

Fourth, Loan Amount can make a difference as well.  Just as there are rate hits for low credit scores, it is the  same for low loan amounts.  This isn't as big of a deal to you since the lower the loan amount the less of a difference in monthly payment you will see when rates vary.

What does all of this mean? Simple; the lenders risk will determine your rate. That is why someone putting 20% down, who has 800 credit and money in reserves will get a better rate than someone who is putting 5% down, has 620 credit and only $500.00 in reserves. The risk is greater on the later individual and therefore they will get a higher rate than the first borrower. This does not mean that the later borrower will not get a horrible rate,  it simply means that they will not get the best rate possible given their current financial situation and credit portfolio.

Now while the above concepts are accurate for conventional loans you do have a couple other options.  These are Government Loans.  FHA, VA, and USDA.  These are by far the products of choice in today's market.  Why?  Because the Government absorbs the risk. Therefore even though the same concepts are followed a more forgiving product is available. Instead of incurring huge rate hits for credit score like on conventional loans, Government loans have few hits.  If you have a 620 score you qualify.  Depending on the lender this gets you the same rate as a 800 score. (some lenders will hit you a little bit if you are under 660)  USDA and VA require no money down and FHA is only 3.5%.  A little easier on the pocketbook that 5% down.  These loans all have funding fees, but VA and USDA have no monthly mortgage insurance.  FHA has a reduced monthly mortgage insurance premium when compared to conventional loans.  So with these perks, Government loans are extremely popular.  They simply allow lower credit scores and higher LTV's without charging higher than average rates.

I hope this helps you understand what factors go into a rate and why they vary from product to product.  It isn't as simple as "my buddy just got 5% so that is what my rate should be!" 

Brought to you by:

Flat Branch Home Loans, Inc.

Our New Application

Posted on September 9, 2009

With our new website design comes a new and improved application.  Unfortunately with any new technology that is introduced, it is common for kinks to pop up here and there.  Anyone that is on this site to apply please read below before applying.  If you are a first time visitor you must setup a Client Login.  This is made up of your email address and a password of your choice.  After doing this you can work your way through the various steps of the application.  When you are finished you simply click the loan officer you intend your application to go to and then click submit.  We will be emailed securely that we have received an application and then we can log in to get it.  Everything is done to make sure your information stays secure.  If for any reason during the application you get sidetracked, you can log off and log back in later to complete the application.  This is a handy feature as well. 

The kink we have been experiencing thus far is in step 2.  For some reason the application is very sensitive to your email address.  If you receive an error that states "duplicate email" then you can try to backup to step 1 and then alter your email address and then try to move forward.  If you do this just be sure to make a comment in the comment box that this was done and list your email there as well as make sure you phone numbers are accurate.  I apologize for the inconvenience of this temporary workaround, but I wanted to at least make mention of it.  You can of course always contact us via phone to apply.  This glitch should be cleared up soon and I will post another note once it is done. 

If you happen to run into any other glitches please email info@flatbranchhomeloans.com.  We would greatly appreciate your feedback since it is very tough to fix minor glitches without solid input on what the system is doing.

Thanks so much!

Flat Branch Home Loans, Inc.

$8000 Tax Credit Ending

Posted on September 4, 2009

Everyone in our industry is aware of the $8000 First Time Home Buyer Tax Credit by now.  Tons of our customers have taken advantage of this wonderful incentive to buy a home.  Well this perk is going away soon.  Anyone looking to take advantage of this $8000 credit must close on a home prior to the end of November 2009.  This means that you must enter into a contract between now and the end of October to a have full proof chance of getting your deal closed in time.  If you enter into a contract in November and hope to rush the closing, there will be no guarantees.  Flat Branch Home Loans will of course do everything in our power to accomodate our borrowers, but there are just some variables that go into the loan process that need to be planned for.  There will be a mad dash of buyers trying to squeak in before this deadline and the Thanksgiving Holiday isn't helping matters either!  As a company we are closed on November 26th and 27th to observe the Holiday.  So this means all deals really need to be ready to close prior to the Holiday break since there is only so much time in the day to get deals closed and funded on 11/30/09.  So keep this in mind while you are shopping for a home and signing final contracts.  Buying a home is an exciting time and with this great credit it is even better!  Just make sure you allow enough time for your closing so this process is truly enjoyable instead of one you are sweating through in hopes of making the deadline.  Contact one of our experienced loan officers to learn more and they can help you get started!

Brought to you by:

Flat Branch Home Loans, Inc.

New Web Design

Posted on September 1, 2009

Our new website design went live today.  If you visit this site from time to time then you will clearly notice the change.    If you experience any kinks while navigating the site please don't hesitate to email me at eric@flatbranchhomeloans.com.  Not all of our content is live and updated yet, but we simply had to get this going.  Changes will happen on a daily basis here in the coming days to get everything up to speed and working effectively. 

One of the biggest changes is the way our secure website application works.  You must setup a client login and password.  This will allow you to log back in at a later date to finish a previously interupted application or check your status.  More info to come soon on all the sites features.  We hope you like it!

Brought to you by:

Flat Branch Home Loans, Inc.