Mortgage Rates on Purchases
The rate you would qualify for on a purchase has many variables affecting it. The great rates you see advertised might not be the rates that are available to you. It helps to know what factors are involved.
What does affect Mortgage Rates?
- How much of a down payment are you supplying? Rates for 100% financing are higher than if you were to put 10% or 20% down.
- The type of loan documentation you are using. Full documentation loans have better rates than either a Stated Income or No Doc loan would carry.
- What is your FICO score? Some lenders will base their rates on your credit score. The higher your score and overall credit rating the better rate you could obtain.
What lenders offer better rates?
- Most mortgage lenders offer rates within two categories; conventional (or A paper loans) and non-conforming (or sub-prime loans). The majority of lenders offer one or the other.
- Conventional rates are the best rates available, they are the ones you see advertised as the lowest fixed rates. Of course these loans require higher standards. They typically only offer Full Documentation loans and require higher FICO scores. In addition they usually want the loan to value under 80% (your loan amount can't exceed 80% of your home's value).
- Sub-prime lenders have higher rates but have lesser restrictions. They will lend to borrowers with lower credit scores, high loan to values and specialize in Stated Income or No Doc loans. These lenders are utilized if the borrowers are unable to be qualified under the conventional guidelines.
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