When it comes to purchasing or refinancing a house one of the factors that can play a role in your ability to secure financing is your credit score, your property type and the purpose of what you’re desiring to secure that mortgage for. Here are some things to consider if you fall into one of these three categories…
If your cash-out refinancing your house no matter what your credit score is on a conventional mortgage the loan will just end up costing more sometimes as much as to .25 to .375 more in interest rate just because you’re doing a cash-out refinance of your house.
It’s the same scenario on a credit card. Taking advance by taking on a larger debt obligation in order to receive cash at hand has a risk to a creditor, as a result, the loan will cost more. One such scenario that might be favorable from a cash-out standpoint is to consider the possibility of an FHA-insured 30-year fixed-rate loan. Not always, but generally speaking the FHA is more lenient on price and cost when stacked up against a conventional loan.
Purchasing a condominium unit with less than 10% down and a credit score under 720 is going to end up costing you more money for two reasons; the property type is generally considered riskier on a conventional mortgage loan standpoint because in a foreclosure situation there’s a legal entity that the lender has involved and that is the homeowners association.
The lender builds that risk into the pricing of your loan which is why a conventional loan for condominium purchase is going to be pricier than a single-family house even if your credit score is excellent, the pricing will still be more on a condo. The pricing will become quite a bit worse if your credit score is under 720 with less than 10% down.
If your credit score is less than 700 on any mortgage loan program, you guessed it the loan is going to end up costing quite a bit more even if you happen to have a down payment of 20%. If your credit score is less than 700 on a conventional mortgage the only way whether it’s a purchase or refinance for you to not be susceptible to pricing changes is to have 40% equity in the property. This tip is something to keep in the back of your mind as you may find when applying the loan that you’re thinking about might end up costing you more when your financial situation has some challenges.
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