How to determine mortgage rate from FICO score?
by Author on Tuesday, May 11th, 2010 | 4 Comments
So the way I understand it is that your FICO score determines the interest rate you will get (along with national interest rate levels).
With that said, when Yahoo says that todays rate is 6.364% what FICO score does this assume. If I have a FICO score of above 720 (assume 720 as worst case) then what can I estimate my interest rate to be given the 6.364%? Lower? Higher? Same?
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"Today’s rate" is average of many lenders, borrowers, types of mortgages, different regions within a particular price range. These numbers are supposed to tell you trends in the market.
Your FICO score, specific info on your credit report, amount (& percentage) of your down payment, your income and debt ratios, length of time on the job and prospects for continued employment/future employment, the property price, the neighborhood, the points and closing costs charged, the lender’s costs, etc. all go into the equation which will determine the terms of the mortgage, including the interest rate!
High FICO means if every other factor is constant, the person with the higher FICO generally pays lower interest rates. And in today’s market, only highly credit worthy people can get mortgages from mortgage lenders.
You really can’t get an exact number. It depends on who your lender is. You have a great score so you will get a better rate then someone with a lower score.
Your FICO score is one factor, not the only factor.
Don’t forget about regional differences in pricing also. I am a mortgage broker in both Texas and California and my California pricing is always higher than my Texas pricing. Higher risk state, I guess. Your FICO should get you into the top tier for pricing, but other factors can apply. For example, the higher loan to value ratio can mean higher rates, just a smaller loan amount, say 50K or less, can mean a higher rate. Lenders also charge a small premium if no impounds are established for taxes and insurance payments. These are just some of the factors that help determine your final rate. And not all lenders are created equal. Some price more aggressively than others. Get in touch with a good mortgage broker from your state and find out the facts.
Hope this helps.