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People Who Do Not Know, Should Stick To What They Do Know.

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Stick To The FactsPeople Who Do Not Know, Should Stick To What They Do Know.  I don't know why I still get irritated when I read articles like the one in MReport.com last week, about a Zillow study reporting 3 out of 10 Americans are unable to obtain a mortgage to purchase a home.  The article did get it right by stating the reason is because these Borrowers have low Credit Scores.  I agree with their statement, in fact in my opinion it is more than 3 out of 10 Borrowers who are not able to obtain a mortgage today because of low Credit Scores.  So why did the article irritate me?

I was irritated by the article, because it suggests Lenders should be approving Mortgages for people who don't pay their bills.  If they don't pay, or can't pay the bills they have now, what makes them think they will pay a Mortgage without first showing the have changed how they manage their finances.  These are the same people who not to long ago were criticizing Lenders for approving Borrowers for Mortgages they could not pay for.

The article went on to state "mortgage availability remains tight".  Mortgage availability is not tight, there is plenty of money to lend, what is tight are the guidelines to qualify for them. 

That is when I started to get irritated, but what really did it was the next statement stating "According to Zillow’s analysis, the lowest rates are currently reserved for those with credit scores of 740 or higher", this is simply not true.  Credit Scores impact a Borrowers ability to qualifying for a Loan Program, and the points a Borrower may pay once they qualify for the Loan Program, but they do not impact what the Interest Rate will be.  For example, if a Borrower needs a minimum Credit Score of 640 to qualify for a Loan Program, it does not matter if their Credit Score is 640 or 800, once the Borrower qualifies for the Loan Program the Interest Rate will be the same.

What further showed the writer the article or Zillow did not know what they were talking about, was making a comparison between the Interest Rate and the APR.  The two are VERY  different.  The APR is not an Interest Rate, it is a Percentage which attempts to reflect the costs of the loan for shopping purposes.  What made it very obvious to me they did not know what they were talking about was the following statement:

"In the 2013 study, Zillow found borrowers with credit scores of 740 or above received an average low annual percentage rate (APR) of 4.42 percent for conventional 30-year fixed mortgages.

Borrowers with mid-range credit (between 620 and 739) received APRs between 4.47 percent and 5.09 percent, and those with scores below 620 received too few quotes to even calculate the average low APR."

The reason why the APR is higher on a conventional loan for a Borrower with at Credit Score below 740, as apposed to a Borrower with a Credit Score of 740+, is because of the points Fannie Mae charges a Borrower based on their Credit Score.  For example if a Borrower is has a downpayment between 5% to 24.9%, Fannie Mae would hit them with the following points based on their Credit Score:

  • 740+       .250 points
  • 739-720   .625 points
  • 719-700   .1.25 points
  • 699-680   .1.375 - 1.875 points
  • 679-660   .2.500 - 2.875 points
  • 659-640   .3.000 - 3.250 points
  • 640-620   .3.250 - 3.500 points

As you can see every time the Credit Score drops by 20 points the Points Fannie Mae charges go up.  As a result the APR goes up because of the higher closing costs, not because the Interest Rate increased.  The Interest Rate stays the same as long as the Credit Scores stay within the Loan Program qualifying limits, and do not change because of the Credit Score.

There is enough miss information out there.  We do not need organizations like Zillow who people trust and think they know what they are talking about, making statements which are not even close to being true.  People Who Do Not Know, Should Stick To What They Do Know, and Reporters should take the time to verify what they are reporting before they report it.

 

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Posted by

George Souto
NMLS# 65149

C (860) 573-1308
CALL 7 Days/Wk
Fax (860) 760-6891

Email Me
About Me
My Blog

I am a Mortgage Loan Officer who can assist you with all your mortgage & refinancing needs in
CT, and RI

I can assist you with your Conventional,
FHA, CHFA, VA, USDA, & 203K loan programs.

I reside in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Haddam. E. Haddam, Higganum, Chester, Essex, Deep River.

 

Comments (54)

Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

George

A well-done rebuttal on this error-filled article. Like so many others we see and know are not factually correct, and yet so many will read them, believe them, and make decisions based on that had information.  It's not just Zillow - we see lots of media-written articles that are simply not well-researched nor based on anything having to do with facts in the real estate world. All we can do is share what we know to be the reality in the hop that readers will get the accurate picture, or will come to us for guidance instead of relying on the media.

Jeff

Oct 04, 2013 02:54 AM
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

I for one am glad that we are back to doing due diligence and for those responsible people, they can get a loan. Even my short sale clients from years ago are now able to qualify if they rebuilt their credit. I hope we remeber the past so we are not condemned to repeat it if we return to ninja loans.

Oct 04, 2013 03:11 AM
Melissa Zavala
Broadpoint Properties - Escondido, CA
Broker, Escondido Real Estate, San Diego County

It seems that anyone can twist the facts just about anyway that they want to. Isn't that what we often have to do to handle an objection?

Oct 04, 2013 04:08 AM
Karen Fiddler, Broker/Owner
Karen Parsons-Fiddler, Broker 949-510-2395 - Mission Viejo, CA
Orange County & Lake Arrowhead, CA (949)510-2395

I can understand your frustration. The mortgage industry is consistently being portrayed as the "bad guy" in all this. The truth is just too complicated for the media to explain, I suppose.

Oct 04, 2013 04:18 AM
Robert Rauf
CMG Home Loans - Toms River, NJ

I have been in the Mortgage biz since 1987, it is easier to get a loan today than it was in the 80's - We didnt even have credit scores when I started. 

yes, we have risk based pricing now, but that is a good thing- it allows more buyers to get approved and it keeps the better borrowers from subsidizing the less than stellar credit peeps.

Oct 04, 2013 04:31 AM
Joni Bailey
101 Main St. Realty - Huntsville, TX
Your Huntsville / Lake Livingston Area REALTOR®

I'm with Nina and Barbara -- I think you should post this to Zillow! :))))

Oct 04, 2013 04:35 AM
John Accornero
Keller Williams Whittier - La Mirada, CA
Accurrate,Accessible,Awesome Realty Experience

Poinnts are still a cost...interest related...you can even deduct points on your tax return. So who is the expert here?

SO YES ! A LOAN DOES COST MORE FOR SOME WITH A LOWER CREDIT SCORE.

You basically just confirmed what Zillow said.

Oct 04, 2013 05:00 AM
Lana Robbins Realtor ® Licensed Real Estate Broker
Aloha Kai Real Estate - Clearwater, FL
Licensed in Florida, Washington, and Hawai'i

Hi George. Perhaps Zillow will "expand" into the mortgage industry soon.

Oct 04, 2013 06:39 AM
Matt Kombrink
One Source Realty - Geneva, IL
Your #1 Source For Real Estate

George, unfortunately it's so easy for anyone to report on anything these days.  Plus, you can always take numbers and twist them to say whatever you want.  People should always look for a LOCAL professional who has the best knowledge.

Oct 04, 2013 06:54 AM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

George, it is true, those KNOWING what the market is doing or required should be writing those articles!    It is still a bit tight even with those having nearly a 800 score.   Too much overlay!

Oct 04, 2013 07:19 AM
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Oh right . . . let's give a mortgage to everyone with a heartbeat . . . as if that hasn't happened recently with dire results!  

Oct 04, 2013 09:51 AM
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

yeah and the next article would be blaming lenders for making loans to people who dont pay their bills??? you cant win unless you arethe feds and control the game but dont play it

Oct 04, 2013 11:04 AM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Amen, George! Amen!

The reason you get irritated is because the trained monkeys siphon off the gravy and discourage good people they can't help! They also set up consumers for failure, going for the maximum commission rather than counseling the buyers to success. They give everyone a bad reputation.

Bill

 

Oct 04, 2013 12:26 PM
Lisa Von Domek
Lisa Von Domek Team - Dallas, TX
....Experience Isn't Expensive.... It's Priceless!

Hello George,

You mean everyone doesn't have a "right" to own a home even if they can't afford it...that's going to be a real shocker to Barney Frank 

Oct 04, 2013 12:26 PM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

It is important for lenders not to repeat some of the mistakes of the past.  Unforunately there were a few that did not do their job.  On the other hand, there were buyers that were not in the positiion to purchase a home and did not provide accurate informatioin. 

Oct 04, 2013 12:26 PM
Ralph Gorgoglione
Metro Life Homes - Palm Springs, CA
California and Hawaii Real Estate (310) 497-9407

The litany of misinformation by a company that claims to know something about real estate is unprofessional plain and simple.

Oct 04, 2013 03:39 PM
Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

George, I'm glad you are able to point out Zillow's false conclusions about mortgage lending. I wonder how many people read that same article and believe what it says without verifying. 

Oct 04, 2013 05:58 PM
Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

George  I am so glad that you took the time to correct the misinformation, because consumers rely on the information they find on these sites.

Your rebuttal should be linked to the article.

Oct 05, 2013 04:22 PM
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

You give a good demonstration of succeeding at what you know how to do best. It is a good thing that the public has options. I always know when I refer a client to you, you will give them good advice instead of what they would get it they read the article we both have now commented on.

Oct 05, 2013 08:56 PM
Kevin A. Guttman-Author, ReverseMortgageSpecialist
NMLS #384936 - Colorado Springs, CO
877-251-9709

George,

Once again you are spot on!

Good job!

Thank you.

Kevin

Oct 08, 2013 07:51 AM