Rates are CRAZY Low but can I get a loan?

Rates are CRAZY low, but can I get a loan?

Earlier today I posted the following message on my facebook profile:

Rates have dropped again...just priced a VA Jumbo streamline at 4.25% with the only cost to the borrower being the financed funding fee of 1/2%....Call me if you would like me to review your mortgage! 410-960-2061

I remember when I was first working with the above mentioned borrower's purchase loan.  Rates were running between 5.0% and 5.5%.  When we were able to lock at 5% the borrower was thrilled.  Not long after, we helped them to refinance the loan and save over $100/mo with ZERO cost. I was surprised, I never thought we would be able to discuss refinancing, but rates continue to drop. 

Based on today's rates, I am able to pay all of the costs (with the borrower financing the 1/2% VA funding fee) on the VA Jumbo (High-Balance) streamline refinance (IRRL) in Maryland and save the client almost $300 per month with a break even in less than 1 year.  These rates are crazy low, my client is a big fan of saving money.  The only thing we have to confirm is the appraised value of the home, a new requirement placed on streamline refinances by the banks, not by VA.

One of the responses to my facebook post was pretty close to what I expected:

Thats great - except no one is lending money unless you have an 850 credit score and no debt... what a joke.

The comment didn't surprise me.  Back in August of 2010 in an interview with George Stephanopolus, Mellody Hobson made several bold statements, unfortunately, she was wrong then, and is wrong now.

MYTH  "You need PRISTINE credit to get a mortgage right now."  

FACT  Some lenders actually still have mortgages available for borrowers as long as they have at least a 580 score, as long as they don't have more than 2 accounts marked more than 30 days late, and can meet other criteria.

VA and USDA Rural Development borrowers will typically need at least a 620 score to qualify.

MYTH  "You HAVE to have a credit score of 730 out of 800 [credit scores actually go to 850] 

FACT  To get the absolute best rates at the lowest costs, a credit score over 740 is required.  As the credit score drops below 740 (incrementally) the costs to borrow increase on Fannie Mae and Freddie Mac loans. 

Standard FHA loans with most lenders require a minimum credit score of 640, though some lenders will lend down to 580, with increasing costs as credit scores decrease.

VA lenders will typically loan down to a 640 credit score, sometimes down to 620.

USDA minimum credit score is 620.

Jumbo Conventional loans typically require at least a 700 credit score.

MYTH   "You HAVE to have 20% down, no question, the banks are being very, very tough"

FACT  VA loans allow 100% financing, ZERO DOWN PAYMENT.  Sellers can pay ALL closing costs.

USDA Rural Development loans allow financing up to 103% of the APPRAISED VALUE.  Sellers can pay all closing costs.

FHA loans allow 96.5% financing, 3.5% down payment.  Sellers can pay up to 6% of the purchase price toward closing costs and pre-paids.

Conventional Financing allows 95% financing, as long as the borrower meets the credit requirements of the Mortgage Insurance Company.  The best rates are available at 80% or below.

*ALL the above assumes primary residence.  Investment loans have more stringent requirements.

The bottom line:   Beware what you take as fact.  If you have questions ask a trusted mortgage professional.  The media is paid by getting people talking, unfortunately, sometimes they don't have any idea what they are talking about!

If you own a home, call today for a mortgage review, you may be able to save a tremendous amount of money over the life of your loan. 

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If you are considering a home purchase, have a discussion with a mortgage professional sooner than later.  If needed, there may be small things you can do to improve your credit score, saving you thousands.

To hear all the misinformation spread in that one Good Morning America interview, copy and paste the following link into your browser.  My thanks to Tom Ward and Dan Flavin for sharing this with me.  Please realize this is just one interview of many over the last few years where the media just plain gets it WRONG!  Take everything you hear with a grain of salt  salt lick!  Until your particular situation is reviewed, you won't truly know your best mortgage option!

 http://www.screencast.com/users/TomWard/folders/Marketing%20Info/media/21a2ca9d-5599-4eef-9313-491ab7786727