Question: I have and am putting 20% down on the purchase of my new home.  Why can’t I get the rates that I see on-line?

Answer: Well, maybe if you had taken better care of your credit we wouldn’t be having this conversation now would we?  Just kidding.  Sort of.

In today’s lending landscape Fannie Mae and Freddie Mac are the primary purchasers of home loans. You may have read that they are experiencing financial troubles.  For instance

in 2004 they purchased $1,116 billion loans from Countrywide of which $559 billion are outstanding.   They could only squeeze 2.5 billion out of Bank of America for bad loans because they gave all of their money to their executives. And their accountant, Mr. Creative, would not allow them to take additional monetary responsibility.

Every day Fannie Mae publishes the rate they pay banks for their loans.   Consumers read it on-line and mistakenly believe this is the going rate for borrowers.  This is a raw rate before profit and risk layers are added. Lenders will also publish rates that do not mention credit scores or specific program details. (Except in the tiny print)

Now Fannie and Freddie will be paying banks less for the 800 credit score loans with loan to values below 75%.   And there will be additional “hits,” the lower the credit score.

What is a poor bank to do in this day and age?  Why pass on the loss of income to the borrower.   At the end of the day the borrower will pay with a higher rate.

FYI: In our credit driven and identity stealing world, we should all sign up with the three credit bureaus: Experian, Transunion, and Equifax and monitor our credit at least once a year.  Pay the fifteen bucks per bureau.  One bureau is NOT a true indicator of your credit score.

FYI2: Do not ignore collection notices! Even if they come from that no good cell phone company that your former girlfriend said she paid.  A collection will drop your scores a 100 points.

Want more information on how to improve your credit scores?  Call us at 480-831-1588.  We would love to help!

Diane Gerdes