My husband and I was approved for a loan to build a new home. The builders lender is countrywide. OUr credit score is 620 and 690. The lender was able to do a 80/15/5 loan. The 80 is on a fixed of 6%. The 15 is on a ARM of 7.25 + prime which is around 12%. WE are putting 5% down on a loan of $200,000. WTF are they serious. I told the lender I was not interested in a 12% ARM. Is the only way I can get the 15% finance is thru a HELOC. Why is the ARM so high. We are going to meet with the lender Friday to discuss other options. I would like to just do a 30 year fixed. What should I do?
What does the market say your business is worth, separate from the sweetheart deals between the builder and their lender? Compare their terms with another lender. Or a mortgage broker, who might place it with any of several lenders. The 80% first is presumably to avoid mortgage insurance. Don't forget to also compare fees and points.
I spoke with the lender on Friday. He was able to get the 2 loans at a fixed rate. the first at 6.0 and the second at 9. My credit score is 691 and my husband is 620. They took his score. Is is customary that the second loan be higher. If i put my husband's name on a few of my cc, as a AU, will this increase his score, therefore decreasiing the rate on the first and second loan. I 'm due to close in June.
It would be normal for a second to be at a higher rate. The first has a lien that places them in front of the lender for the second, so there is higher risk for the second mortgage holder. Whether the interest rates you are quoted are competitive is a question I will leave to others. Why is your husband's score 620? Does he have limited credit history, are there negatives, or are his cards topped out? Also, why is his score the main one being considered? Is his income higher? Since making him an AU on one of your cards would probably lead to your TL being posted on his report, I would expect that this would have the most effect if his credit history is good but thin, with some benefit if his debt to available credit is high and your account has a high unused credit limit (provided your payment history is good). With a score of 620, I would suspect your husband has some negative items. Is there some way to deal with these? Any outstanding charge-offs would likely have to be settled to close. I believe Suzy Orman had some credit report package thru myFICO.com that allowed what-if calculations to be done on the effect of potential changes to your credit on your scores. I have not used the product, however.
You may want to look at doing the loan as a standalone at 95% compare the payments including MI and see how close they are......if the difference is only 10-20 a month keep in mind that you do not have to refi to get rid of PMI just get the property re-appraised when your LTV is below 80% PMI goes away......the rate never gets lower. Cedric CKALVESMAKI@1STMETRO.NET 888-383-0220 http://www.1stmetropolitan.com/littleton Licensed AL,AK,CA,CO,FL,IN,IW,MA,MI,MN,MD,NE,SD,VA,
The reason my husband's score is 620 is because he just became a permenat resident in this country. We opened three accounts together, all in perfect standing. These accounts are only 1-2 years old. I think his score is good, stating he has only been in this country for 3 years. Yes, his income is higher than mine.
construction loans aren't the most competively priced products. my best advise is to take the first and second fixed, make sure you make timely payments for a full year, then look at refinancing at a new appraised value. Ask your lender about any prepay penalty's. the 12 months mortgage history will help your husbands score, although it won't make a dramatic difference in your rate untill you guys cross over 680, and get your Loan To Value under 80%. See if you can't clear up a few negatives on his report in the next year.
I agree with cedski. Don't think you have to have two loans because you don't want to pay PMI. It may be cheaper in the long run to get one loan for the 95% and pay the PMI for a few years. I think it's either 2 or 4 years you have to pay before you can get the PMI removed. But if it's only a few dollars and the other loan has a lot more in interest it might make sense. The builder is steering you to a certain lender, and perhaps even a certain type of loan, because he gets a kickback from the lender. But you don't have to use that lender. As others suggested, go to a mortgage broker and see what is available. Some states have special programs for first time homebuyers or things like that which the other lender may not consider. This is a big step and a big loan, so do some research and get the best deal you can. Ask the broker what you can do to help your score--he or she may know what works with certain lenders.
Again, he has no negatives. The accounts are new. That's why the score is 620. There is no prepenalty fee. So we thought at least for the first 3 years pay the second loan at 9%, then refinance. The first is at 6%.
