I recently signed a purchase agreement for a house, a bank mortgage company had pre-approved me. In this market today, they offered me an interest rate of 6.5% with the option of buying points. The house I am buying is a fixer upper/foreclosure.great deal at 47,000, I am taking out a conventional loan with 20% down (9400.00) so my loan will be for 37600.00.
Why are they offering me a 6.5% rate when the rates now seem lower? Is it based on my credit? Would the points be 1% of the loan amount? How much would each point lower the interest rate?
Are there any restrictions to requesting a 15 versus 30 year loan (I want 15– is this based on credit, or what is it based on to get this approved?)
I am preapproved, is there any reason that I can be ‘not approved’ now in this process (other than the appraisal on the property). What documentation will I need usually? They have already done a credit check, and I do bank with them already/checking.
When should I lock in my rate? ASAP, or should I wait, closing is feb 27th.
I have the 9400.00 down payment, I have 3 paychecks yet before closing, the closing costs are to be paid for by the seller, I still need to buy homeowners insurance. Do I need to pay taxes first too in escrow (I read that somewhere). should I take out a cash advance on my credit card to buy points if I need to (spend now save later) or a personal loan?
Thanks to all who have answered any of these questions
The reason your rate is high is the small loan amount.
Your debt/income ration mat not substantiate a 15 year loan.
Paying a point ($375) may be worth it. Plug your loan amount and payment in a loan calculator and see how much you’ll save per month by investing in discount points. Then, you can see how long it will take to make up your upfront cost.
The only downside, you can’t borrow money on a credit card to pay your closing costs. They all need to be verified as yours, unborrowed.
Could it be that any credit card debt affected your interest rate?
If you carry more than 30% of your availble credit your scores go down. Although I dont think 6.5 is bad, I would ask them why.
I don’t like points. I know that I will not live in this home for more than 8 years, and paying for points only makes sense if you are planning to stay the full time of your loan.
Patience might count here. Find out why your interest is high. My mortgage lender asked me why I had opened 3 cc accounts in the last 3 months – you can talk to them. /
References :
The rates that you normally hear about are based on people with perfect credit. You may have a few dings that brought your credit score down. I can’t tell you how much a point will lower your rate but if you don’t plan on staying in the home more than 5-7 years, points aren’t worth the extra expense. There isn’t a difference in credit scores to get a 15 vs 30 year mortgage. I would go ahead and lock in your rate soon. They aren’t likely to change very much in the next few months or even the forseeable future since the federal funds rate is practically zero. You don’t have to pay your taxes in escrow, but you will have to tell them if you don’t want to. All the money that you need to pay you will have to bring with you to closing. Usually they aren’t more than $1,000 so try not to take out a loan if you can.
References :
The reason your rate is high is the small loan amount.
Your debt/income ration mat not substantiate a 15 year loan.
Paying a point ($375) may be worth it. Plug your loan amount and payment in a loan calculator and see how much you’ll save per month by investing in discount points. Then, you can see how long it will take to make up your upfront cost.
The only downside, you can’t borrow money on a credit card to pay your closing costs. They all need to be verified as yours, unborrowed.
References :