It’s been on the news, the radio, online, basically anywhere you look over the past few weeks you have seen that interest rates are at all time lows. So what does that mean for you? How much can you save? Well that depends on a lot of factors.
Some of the factors that impact the interest rate you qualify for are:
- Credit Score – lenders will look at your middle credit score
- Loan to Value – your new loan amount compared to the appraised value of your home
- Debt Ratios – your monthly debt compared to your gross monthly income
- Type of Property – lenders still like single family residences more than they do condominiums/townhouses/manufactured homes
- Type of Loan – Conforming, FHA, USDA, VA all offer different interest rates and different adjustments
- State – Ohio residents can contact me or complete the rate quote form for a quote. Residents of other States need to talk to Loan Officers licensed in their State as lenders issue different rate sheets for different parts of the country
As you can see, it’s not as simple as a one size fits all interest rate. So with that in mind, lets look at some examples based off interest rates as of June 1, 2012.
Ohio HARP Refinance Rate Example
Let’s say Mark in Ohio is looking at a HARP refinance on his owner occupied, single family residence. The details of Mark’s HARP refinance are:
Middle Credit Score: 745
Amount Owed: $150,000
Property Value: $200,000
Loan To Value: 75% ($150,000 / $200,000)
Property Type: Single Family Residence
Type of Loan: Conforming
Location: Cincinnati, Ohio
Based on the above Mark may opt to refinance at:
30 Year Fixed – Fannie Mae HARP
Interest Rate: 3.875%
Estimated Principal & Interest Payment: $705.36
Estimated Closing Costs: $400 + appraisal (if required)
Estimated APR: 3.919%
Let’s look at how things change if Mark had a 719 middle score and his property was worth $150,000, which would put his Loan To Value at 100% (remember Ohio residents doing a HARP refinance have no cap on their loan to value)
30 Year Fixed – Fannie Mae HARP
Interest Rate: 3.875%
Estimated Principal & Interest Payment: $705.36
Estimated Closing Costs: $1525 + appraisal (if required)
Estimated APR: 4.089%
Notice the increase in closing costs at the same rate? That is due to Fannie Mae and Freddie Mac’s Loan Level Pricing Adjustments (LLPAs). These LLPAs are adjustments based on credit score, loan to value, and property type. Although they are limited on a HARP refinance, they still come into play.
Ohio FHA Refinance Rate Example
Let’s use Mark in Ohio again, once again he is looking to refinance, but this time with he is doing an FHA refinance. Here are the new details
Middle Credit Score: 745
Amount Owed: $150,000
Property Value: $175,000
Loan To Value: 85.7% ($150,000 / $175,000)
Property Type: Single Family Residence
Type of Loan: FHA
Location: Cincinnati, Ohio
Based on the above Mark may opt to refinance at:
30 Year Fixed – FHA
Interest Rate: 3.5%
Estimated Principal & Interest Payment & Mortgage Insurance: $835.35
Estimated Closing Costs: $950 + appraisal
Estimated APR: 4.10%
What if Mark had a lower credit score? Let’s take a look at how the figures change if Mark has a credit score of 661.
30 Year Fixed – FHA
Interest Rate: 3.50%
Estimated Principal & Interest Payment: $835.35
Estimated Closing Costs: $2300 + appraisal
Estimated APR: 4.178%
Again you will see the increase in closing costs at the same rate, just because of the credit score change.
As you can see, it’s not as simple as checking one of the many online resources for current interest rates. If you read the small print, those rates are usually based on a $150,000 loan amount (or higher) at 75-80% financing with credit scores of 760 or above and quite often have you paying a point or more. While we would all love to qualify for those rates that are on the news, the reality is that you need to speak to a qualified Loan Officer to go over your options.
You can CONTACT ME or request a rate quote if you would like to check your options.
