I received a good question the other day from a reader of Keith’s Blog and thought I would share it with you. The question was, “can I put 15% down on a loan and still get a good rate?” The answer is yes. Depending on your FICO (credit score), you can even put as little as 10% down and still get a great rate. The way it works is there is an adjustment matrix of “points”, or I like to call them hits, based upon what your credit score is and how much you’re putting down. Depending on the scenario you may get a worse interest rate, or may have to pay more points, or even both. As an example, if you put 15% down you need a credit score of 720 or greater to not take a hit (this is just a rough estimate). This adjustment matrix changes daily and is different from lender to lender. If you have a FICO (credit score) of over 740, you can even put as little as 10% down without a hit. Sometimes lenders have special programs going on where you can even put less down than 10% as long as you fall into a certain scenario (high FICO, low Debt to Income, primary residence, assets, etc…). Keep in mind even if you don’t have a 740 FICO you can still put less than the standard 20% down but you’ll have to pay for it. As a note, there is a big hit for Non-Owner occupied (investment) properties.
I am guessing not many of you have rates below 6% with your current mortgage, and if you do, I would guess it isn’t a 30 year fixed loan. For those who haven’t been reading any Real Estate headlines, mortgage rates are at historic lows…and I am not just saying that. The 30 year is below 5%. Not too long ago anything below 6% was awesome, and 5.5% was fantastic. Remember when I hesitated to say rates have bottomed out? Well, I hate predicting things and please don’t hold me to it, but if I had to guess and I am probably stating the obvious, I would say interest rates have bottomed out.
If you need any help doing any calculations (whether or not it is worth your while to refinance) or have any questions, please don’t hesitate to contact me at RBaker@PeregrineLending.com or 805-540-0866.