Tuesday, April 15, 2008

What’s your rate?

That is the most common question I here today. It is also the one we have the most difficulty answering. With all the changes in the mortgage market over the last 9 months it has been increasingly difficult to quote accurate rates. That is not to say people are not out their doing it anyway, then changing the rate after they find out that their client falls into one of the new adjustment categories.

So what are the adjustment categories? I will make every attempt to answer that here although they seem to change as soon as you make mention of them.

We have always seen adjustments to the rate when taking cash out of your home, however they usually started at 75% loan to value. Now the adjustments start at 60% loan to value and have an added caveat of having a credit score adjustment to go with it. One year ago if you were taking cash out at 80% (a standard move to avoid monthly mortgage insurance) you might see a .750 point hit on your loan. Today with a 660 credit score you are likely to see a hit of 2.00 points. That translates into getting an end rate of 6.125 under the old pricing system and 6.625% under the new pricing system. There are also hits now under no cash out scenarios because of the new tiered credit scoring adjustment system.

So where do these changes leave us when considering the question “What’s your rate?”

It leaves me asking you questions like:
What is your house worth?
What is the value of your home?
Are you taking cash out?
What is your credit score?
Do you have secondary financing?

In essence we can not honestly quote you a rate unless we know the answers to each of these questions. Anyone who is quoting a rate without knowing the answers to these questions is doing you a huge disservice because you can almost bank on the fact that at some point they will change the terms of the loan you have applied for.

Do you have questions about the new rate structure? If so please feel free to submit them here.