Excellent Credit Mortgages and Personal Loans
Getting the Best Mortgage If
You Have Excellent Credit -
Information You Should Know
Mortgage Refinance -
If you have excellent credit and need a mortgage, you are in a much better financial
position than borrowers with lesser credit scores. If your FICO credit score is over
760, you're considered by lenders to have an excellent credit score. Those borrowers
with excellent credit are naturally given the best interest rates on mortgages and other
NOTE: In response to the economic woes afflicting the U.S., in mid December,
2008, the Fed dropped the federal funds rate yet again, this time to almost 0%. They
have continued to hold it low since that point! They met once more in November,
2010 and decided to continue to hold the rate down. They have held to since then, in
an effort to increase economic output. This drop sent mortgage refinancing rates for
people with excellent credit to the lowest interest rates in 50 years!
If you have great credit and a mortgage, this may be the silver lining in the dark
economic clouds. You'll be able to take advantage of the low rates to lower your
monthly payment. In many cases, with excellent credit you can refinance and change
from a traditional 30-yr mortgage to a 15-yr with very little difference in your
monthly payment. Even if you are 5 years into your existing mortgage, such a move
would slice 10 years off the time it takes to pay off your home. Imagine how much
extra money you'll have by effectively skipping 10 years of house payments!
With the problems in the credit industry that began in 2007, some borrowers with
good, but not excellent credit scores have reported difficulty getting mortgages. If
your credit score is in the excellent range, you should experience no such difficulties.
Lenders will be happy to originate a mortgage for you.
Some lenders actually specialize in mortgage lending only to borrowers with excellent
credit. If you fall in this category, this is beneficial, especially in the current credit
environment, where many lenders are tight with credit. If the lender services
mortgages for all credit ranges, they incur more risk. To mitigate the higher level of
risk they have to charge more. Often they charge more in interest, fees, or both, even
to borrowers with higher credit scores.
The excellent mortgages available to borrowers with excellent credit highlight the vital
importance of actually knowing your credit score before you shop for a mortgage.
This is true if you are seeking any financing, weather for a home, car, or any other
reason. The difference between being considered to have excellent credit and being
one range down can cost you a significant amount of money every month and slow
your loan approval.
As an example, FICO considers your credit to be in the "Good" range if your credit
score is in the range of 700 - 759. In the spring of 2012 such a score allowed you to
get an average mortgage interest rate of only 4.05%. You can get a significant
reduction in your interest rate if you move up into the "excellent" range. Currently the
increase in credit score equates to a drop in mortgage interest rate of up to 6%.
Although interest rates change daily, it serves to illustrate the importance of excellent
credit. For some types of personal loans, you can get an even better rate, as long as
your score falls in this range.
That's why it's essential to know what your credit score is before you get a
mortgage. If you are just below the 760 mark, you can easily raise your credit score a
few points and pay a lower mortgage interest rate. In the above example, your
principal and interest (P&I) payment on a $300,000 mortgage or refinance would be
$1,888 if your score was 759 and drop to $1,844 if your score was only one point
higher, at 760. Over the life of a 30 year mortgage, the extra $44 per month would
add up to $15,840.
That single point on your credit score that brought you into the "excellent" category
was worth almost $16,000. If you were to invest this money at a fairly typical rate of
return, 8%, you would generate an even greater sum at the end of the 30 years. Due
to the power of compound interest, the seemingly measly $44 a month you saved by
getting an excellent credit mortgage would, if invested at only 8% interest, grow to a
staggering $64,599! Were you to manage a healthy, but not uncommon 10% return,
your $44 monthly savings would grow to over $95,000!
That points to the importance of having excellent credit. Not only will you get the
best mortgage, but it will be faster, and easier as well. In addition, the money you
save could allow you to retire in much better style!
How to Get More Attractive Mortgage Interest Rates
One way to get a fantastic interest rate is to use competition among various lenders
that know they're in a competitive bidding situation. Competition in all industries
results in a better deal for consumers, and it's no different in the mortgage refinance
One thing that can be very beneficial if you do have excellent credit is to choose a
lender that specializes in such borrowers. You'll be well rewarded, getting the lowest
possible interest rates and fastest service on your loan.
Another refinancing option if your credit is excellent would be one of the top tier,
on-line banks. Online banking began about a decade ago, but in the last 3 years it's
really gained momentum as consumers look for options that pay better interest rates,
are more convenient, and offer a lower rate on mortgages and refinances.
Keys choosing the right lender for an excellent credit mortgage or refinance -
If you have truly excellent credit, you're in the catbird seat. Lenders are falling all
over themselves to lend money - if your credit is truly excellent. The problem for
many borrowers is that what qualified as excellent credit in 2007, won't fly in 2009.
If your FICO score is over 760, and definitely it is higher than 800, you'll stand an
excellent chance of getting a great mortgage loan however.
Any lender that specializes in loans for borrowers with excellent credit should give
you the following:
* The lowest mortgage or refinance interest rates- Remember, the mortgage
rates you pay are the largest factor in determining the size of your monthly payment
except for the amount you borrow. If you have excellent credit, your rates should be
commensurately low. After all, you've earned it!
*No Hidden loan costs - In the last few years lenders have been generating a larger
percentage of their revenue from fees. If you see phrases such as "pay no up front
costs." or "nothing out of pocket" be especially careful. Just because you're paying
nothing out of pocket does not mean that you're not paying anything. In many cases
these fees are merely added to your loan, where you'll pay interest on them for 15 -
30 years. Go over the mortgage contract and all addendums with a fine toothed comb.
It is common practice in the mortgage and credit industry to include additional fees
and charges. The can easily total thousands of dollars, even before the interest
charges. Some mortgage firms feel they have you with your back to the wall and you
either won't notice these additional fees, or will just go ahead and pay them. Don't do
it. If you have excellent credit you don't need to put up with such behavior from your
lender, as borrowers with lesser credit must often do.
Make sure your contract has no clauses that overly favor the lender or restrict your
legal rights. Hire an experienced real estate attorney to thoroughly examine it. This
can easily run up to $500 in large cities, but it will money well spent. Failure to have
competent legal counsel look at your mortgage contract can cost you thousands of
dollars later. Don't make that mistake.
* Excellent service - It's important to use a lender with an excellent customer
service department. They should be responsive, available, and ready to answer any
questions you may have during the refinance process or after your loan has been
information is obviously extremely important. Many firms will sell your data to
marketing or research companies, possibly putting your security at risk. It is
common industry practice, as marketing data is very valuable and for many
businesses is a significant source of revenue. Check to ensure that your lender will
not sell your personal information once you've applied for your mortgage.
Quick Tips To Get Your Mortgage to Close Faster
Even if you do have an excellent credit rating, there are still things you can do to get a
better mortgage loan, and reduce your closing time.
Deliver All Paperwork On Time - There is an inane amount of paperwork required to
get a mortgage, no matter how good your credit is. One great way to lessen the time
to closing is to make sure you get everything to your lender as soon as possible. It is
common for a loan to be held up for weeks thanks to one missing bit of paperwork.
Even if their request seems rediculous, and many will, get them what they ask for,
Make Sure You Get Your Home Appraised ASAP - This is another huge factor in
allowing fast closings. Remember, the appraiser need access to your house in order
to appraise it, so make sure they can get it as soon as possible. Make sure they have
all your contact info so scheduling an appointment is easy. Due to the shenanigans
pulled by so many mortgage companies in the first part of the 2,000s, they cannot
directly contact the appraiser, which makes for a more convoluted process, so be
ready for it!
These two simple tips can get you your mortgage much faster. Remember, excellent
credit is no substitute for thorough preparation.
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