Homestead mailing list

[Lisa Perry <lkvp AT floydva.net>]

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