What are Mortgage and Refinancing Rates?

The number one question a potential borrower asks when looking for a mortgage purchase or a refinance is “what is the rate?”

The response that your Loan Officer usually provides is “there are many factors that go into a potential loan and I will need to take a complete application to give you an accurate answer.”

This is not just your Loan Officer trying to dance around the question. It is a fair and honest answer. There are at least 17-20 different variables that go into the financing of an Arizona mortgage loan.

This is a list containing most of the variables that affect financing:

Mid score- What is your mid credit score? It might be the number one factor involved in the loan scenario. The higher the mid score, the better your rate gets.

Loan to value(LTV)- Another huge factor. This financing variable will depend on how much equity you have in your home. To determine your loan to value, simply divide the loan amount by your home value. For instance, if the potential loan is $80,000 and your home is valued at $100,000, the loan to value is 80%. This would also apply if there were a second mortgage, then the term would be combined loan to value(CLTV), which incorporates the first and second mortgage into the loan financing.

Payment history on the mortgages- Typically, lenders will look at a 12 month mortgage history, sometimes 24 months when considering a loan approval. 30 day late mortgage payments are not a good compensating factor when a company is considering lending hundreds of thousands of dollars out to a borrower. Usually the mortgage history appears on the credit report, sometimes a lender requests a “VOM”(verification of mortgage) as payment verification.

Loan size- Very small loans and very large loans are not as competitive in terms of rate than a loan size between $75,000-417,000. Anything under 75k and over 417k will carry a bit higher loan rate.

Lock period- If your lock period is less than 15-21 days, your rate might be slightly better than a lock period of 21+ days.

Residence type- Primary residence will carry the best loan rates. Second homes and investment properties will have a bit higher loan rate.

Doc type- Full doc is the strongest doc type, usually followed by stated, no ratio and no doc. This is a big issue currently in the Arizona refinance and purchase market.

Some of the other variables include, but are not limited to, loan type,prepayment penalty options,escrow services, and seasoning requirements.