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  • From: Lisa Perry <lkvp AT floydva.net>
  • To: homestead AT lists.ibiblio.org
  • Subject: Re: [Homestead] It is happening
  • Date: Tue, 08 Feb 2005 11:30:32 -0500

Don Bowen wrote:

Sub prime?

Loans for the less credit worthy borrowers.

Let's see $500k at 30 years....
At 4% it's 2378.03/month comes out to 859.347.53 over the life of the loan

I shudder to think. The first and most important definition of 'subprime' is for those with an average credit score of less than 620. Average doesn't mean you take all 3 scores and use the median score, it means which ever score is in the middle from the 3 credit bureaus is the score lenders use. A 500k mortgage is a jumbo loan which carries approximately a .50 higher interest rate than a regular (non-jumbo) 30 year mortgage loan. In my area, to secure a 4% rate for a 3 year ARM loan (Adjustable Rate Mortgage loan) you'd have to pay 1.50% just to buy down to that rate. You should only get an ARM if you plan to move in the next few years, i.e. a 3 year ARM and move/sell before your 36 months is up. If you plan to keep your home longer than 3 years or are uncertain, then stick with a 30 year fixed rate loan. I detest subprime loans and am thankful that 90% of my business is 'conventional'. Today I'm quoting 5.625% for a 30 year conventional mortgage loan in Virginia, however rates vary in regions throughout the country. Add 1.5-2+% to the going market rate for your area to get a valid subprime rate, depending on the loan-to-value, your credit score, any outstanding non-medical collections, if you have had a bankruptcy in the past (which type--Chapter 7 or Chapter 13 and how long ago it was disbursed) and a few other factors.

Lisa





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