With the Tri-Cities, Washington being such an incredible to live and work, and with such a strong housing market, potential home buyers will want to start the process by checking on their current credit scores prior to visiting a lender. The mortgage industry has made some changes to the guidelines for financing or refinancing due to the anticipation of future losses.
Homebuyers with credit scores below 680 with equity or a down-payment less than 30 percent of the home’s value subject to higher interest rates. In accordance with a tiered adjustment schedule, loans with certain characteristics associated with mortgage risk will be assessed a pricing surcharge.
The breakdown of surcharges for borrowers that fall into the high-risk categories is as follows:
* Credit score below 620 = 2-percent fee
* Credit score 620-639 = 1.75-percent fee
* Credit score 640-659 = 1.25-percent fee
* Credit score 660-679 = .75-percent fee
If a borrower does not want to pay the fee upfront and wrap the cost into the loan, this could result in an interest rate increase from .125 to .5 of 1 percent. Now more than ever it is important for anyone considering a home purchase or refinance to monitor their credit scores.
Track your expenses, make a budget and stick to it. Make every effort to pay down credit card balances and be sure to make your payments before the due date. Consistent payment and prudent use of your credit card privileges will help to raise your credit scores and keep you out of the high-risk category.
By Debbie Campbell, Sr VP Conway Financial