Coventional Loan Pricing Changes that affect Louisiana Customers
Louisiana - The secondary market which most lenders sell closed mortgage loans to has increased the cost to buy a home starting in the New Year for some borrowers. Effective January 2, 2008, lenders selling to Fannie Mae and Freddie Mac will make price adjustments affecting what borrowers with credit scores below 680 will pay. The adjustments will substantially change the interest rate and point structure available to the public. As of December 27, 2007 Experian.com reports that the National Score Index is 692, which means a high percentage of Americans, will be affected.
A credit score scale determines the costs of the new adjustments. The mortgage industry uses the middle of the three credit scores available through the three national repositories. In the case an individual only has two scores reporting, the industry uses the lower of the two. Whatever the mid or low score dictates, the adjustments are as follows. For credit scores of 620 – 639, a 2% increase; 640 – 659, a 1.25% increase and 660 – 679, a .75% increase. These increase are in the pricing, which is typically known as points. A borrower may choose to not pay points by increasing their interest rate. Typically one point equals a quarter percent increase in the interest rate.
National programs available to the home buying or refinancing public that are not be affected by these changes are loans available through the Federal Housing Administration (FHA), the Veteran’s Administration (VA) and the United States Department of Agriculture (USDA Guaranteed Rural Development). These programs do not currently have minimum FICO score requirements and do not have price adjustments due to credit scores.
A prospective buyer or homeowner should ask a mortgage broker or lender if they offer these programs before being steered into a higher cost loan program. Many mortgage brokers do not hold approvals to originate FHA, VA and USDA mortgage programs. By speaking with a mortgage loan officer that has the ability to originate the different programs, a customer subject to conventional price adjustments could save thousands of dollars in up-front and interest charges.
A complimentary web site available to the public, which has information available to educate consumers about home buying, selling and refinancing is available at www.lenderLA.com. The legislative changes coming from Federal and State government are in response to consumer abuses. The best tool a consumer can use is free education available throughout the internet.
This article is compliments of Kevin Zamjahn, a 10 year mortgage loan officer from Mandeville, Louisiana. Kevin Zamjahn is a branch manager with America One Finance, Inc, a licensed mortgage lender/broker within the state of Louisiana. America One Finance originates the programs mentioned in this article.
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