What Determines My Interest Rate ?

Your credit score is only a PIECE of the puzzle, when lenders look at the interest rate they charge you on your loan and whether they will even GIVE you a loan on a residential property.

More important than even your credit score is whether the property will be owner occupied or rental. Many of the programs touted by lenders are available only to owner occupants.

Your FICO credit score is 35% determined on your specific payment history; 30% determined by your current level of indebtedness; 15% determined by the time your open credit lines have been in use (10 year accounts are good); 15% determined by the types of credit you have (mortgage loans are better than credit cards) and, finally 5% is determined by the number of recent inquiries that have been made on your credit. Your credit report must contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a FICO score.

Look at the table below. EACH of the factors listed, will determine what lender your mortgage broker can use, and what your program and rate will be.

You should also make sure that EACH of the subjects (such as pre-payment penalties, and escrows) are discussed with your mortgage broker so that you get what you want, instead of what’s easiest for the broker to get for you.


Many Lenders                                                       Fewer Lenders
With Good Rates-----------------------------------------and/or Higher Rates

Owner Occupied---------------------------------------------------Investment

740 Credit Score---------------------------------------------------500 Credit Score

80% Loan to Value-------------------------------------------106% Loan to Value

2 Year ARM-----------------------------------------------------------30 Year Fixed

12 Months Title Seasoning----------------------------------------Next Day Sale

W-2 Income------------------------------------------------------------Stated Income

U.S. Citizen------------------Legal Alien------------------------Foreign National

2 Years on Same Job-------------Self Employed-----------------Unemployed

Single Family Residence-----------------Condo-----------------Mobile Home

2 Years Verifiable Rent or Mortgage--------Private VOR-----------No VOR

Purchase or Refinance for Same Loan Amount-----Cash Out Refinance

Amortizing Loan--------------------------------------------------------Interest Only

6 Months PITI + Down Payment With 60 Days Seasoning-----No Assets

5 Years Hard Pre-pay Penalty----------Soft Pre-pay-------------No Pre-pay

Escrowed Taxes & Insurance----------------------------------Escrows Waived