Major industry-wide changes to conventional mortgages. What does that mean for you?

December 20, 2007

Pay your bills on time, or pay more for a mortgage loan. That’s it in a nutshell.  This is good news in respect to reducing the number of risky loans that contributed to the rash of foreclosures these days. Bad news for buyers with less than stellar credit.

Priority Mortgage Corporation, one of First Weber Group’s in house mortgage brokers, announced this major industry-wide change to conventional financing today:

"Effective on all new registration for Owner Occupied Single Family, Condominiums and Second homes the following rate adjustments will apply"

(Example below based on Dec 18, 2007 rates. Each credit tier increases by approximately .25%  Interest rates vary each day and will include this .25 increase dependant on borrower credit score)

30 Year fixed          6.25%      Credit score of 680 or higher

                           6.50%      Credit score of 660-670

                           6.75%      Credit score of 640-659

                           7.00%      Credit score of 620-639

                           7.125       Credit score below 620 or no credit score

NO rate adjustments on credit scores of 680 and over

NO rate adjustment with 30% down regardless of credit score

All loans subject to automated underwriting approval. Additional rates adjustments may apply"

This may really curb some buyer’s ability to buy affordable housing which is unfortunate, especially for first time home buyers trying to get their foot in the door of homeownership. On the other hand, it is kind of like the "Good driver discount" you get when you buy car insurance.  Good drivers get better rates.  Good credit get better rates.  There is some "reward" for using credit responsibly.

What do you think?  Do you know what your credit score is?  I do not but I am going to find out!


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