New Credit Score Requirements

January 4th, 2011

Fannie Mae has announced new rules regarding credit scores that will impact the terms you get on a mortgage. For many years there have been rules that say you pay a higher rate with a lower credit score. Now the rules have gotten even more strict causing costs to rise.

Below is an announcement from one lender we work with that will help illustrate:

“In response to the new agency (FNMA/FHLMC) loan level price adjustments, ______ Mortgage Company will be making the following changes to our conventional price grids. Effective with all new interest rate lock-ins on Monday January 3, 2011, the following price adjusters will apply (these are called “add-ons”, and are points that are added on to the interest rate):

Conventional Fixed/ARM Loan Price Adjustments:

Loan-To-Value FICO>=740
70.01 – 75.00% 0.00 (used to be 0.00)
75.01 – 80.00% 0.25 (used to be 0.00)
80.01 – 85.00% 0.25 (used to be 0.00)
85.01 – 90.00% 0.25 (used to be 0.00)
90.01 – 95.00% 0.25 (used to be 0.00)

Loan-To-Value FICO 720 – 739
70.01 – 75.00% 0.25 (used to be 0.00)
75.01 – 80.00% 0.50 (used to be 0.00)
80.01 – 85.00% 0.50 (used to be 0.00)
85.01 – 90.00% 0.50 (used to be 0.00)
90.01 – 95.00% 0.50 (used to be 0.25)

Loan-To-Value FICO 700 – 719
70.01 – 75.00% 0.75 (used to be 0.50)
75.01 – 80.00% 1.00 (used to be 0.50)
80.01 – 85.00% 1.00 (used to be 0.50)
85.01 – 90.00% 1.00 (used to be 0.50)
90.01 – 95.00% 1.00 (used to be 0.75)

Loan-To-Value FICO 680 – 699
70.01 – 75.00% 1.25 (used to be 0.75)
75.01 – 80.00% 1.25 (used to be 0.75)
80.01 – 85.00% 1.50 (used to be 1.00)
85.01 – 90.00% 1.50 (used to be 1.00)
90.01 – 95.00% 1.75 (used to be 1.50)

So as an example, if you had a 718 credit score, and had a 10% down payment (which is a 90% Loan-To-Value), you’d pay an extra 1.00% point on your loan. If the base rate was 5% with 0 points, you’d pay 5% with 1 point. An extra 1.00% in points is $1,000 per $100,000 you borrow. On a $400,000 loan amount that is an extra $4,000!

If you had a 770 credit score (a high score!), and had a 20% down payment (an 80% Loan-To-Value), you’d still pay an extra 0.25% points on your loan. If the base rate was 5% with 0 points, you’d pay 5% with .25 point. An extra .25% in points is $250 per $100,000 you borrow.

You need to have 25% down payment, and over a 740 credit score to avoid any add-ons at all! The moral of the story is that not only are loans continuing to get harder to get due to tightening guidelines, they are also getting more expensive.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.​

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