Why an Application and Credit Report are Needed for a Rate Quote

Every individual’s goals and loan scenarios are very different and no two loans are alike.   A completed application and credit report provides the information a loan officer needs to help you select the best loan product, rate and terms to meet your short and or long term goals.

Here are a number of questions answered by an application and credit report that have an impact on your interest rate and terms.

  • Loan Purpose: Purchase, Rate and Term Refinance, Cash out Refinance.  Your loan purpose directly impacts your rate.  For example a purchase will give you the best rate while a refinance will be a bit higher and then higher for a cash out refinance. Purchases typically always have the best rate.
  • Credit Score: Some loan products are credit score driven.  Conventional loan products are credit score driven while government loans (FHA, VA) are not and are typically available for credit scores as low as 620.
  • Debt to Income Ratio (DTI): Your DTI may determine Loan Product which also impacts your rate. If your DTI is too high, you may be required to choose a government loan which is currently allowing a higher debt to income ratio in a lot of scenarios.
  • Loan Type: Different loan types have different terms which also have different rates. Conventional, FHA, VA, USDA loan products have a different range of interest rates, down payment requirements, seller contributions, and underwriting guidelines.
  • Loan to Value (LTV): Your LTV compares how much of a loan you want to how much your home is worth. A larger down payment will make your loan amount lower, which then has a lower LTV. The lower the LTV the better rate you will receive.
  • State your Property is located in. There is a slight adjustment of the rate depending on which State the Property is located in. This could be an increase or decrease for your area.
  • Occupancy of Home: Is it your primary residence, second home, investment property?  Primary residence transactions have the best rates followed by second home, followed by investment property.
  • Property Type: There are several different kinds of property types. A single family is one house for one family. A multi-family may be a duplex, quad-plex, etc. Other types include manufactured homes or condominium.  A single family property typically has the best rates.
  • Lock in term of rate: 15, 30, 40, 60, etc.  The longer the lock in period the more it will cost.  Keep in mind interest rates are floating and subject to change daily until you elect to lock it in and for what term.
  • Discount points: Would you like to buy the interest rate down?  Talk to you Loan Officer to see if buying the interest rate down is something to consider.

Many details go into determining an interest rate. The higher the risk, the higher the rate. A good loan officer can learn about your goals and help you determine what options you have for the very best rate.   Contact us today to learn how we can help you reach your financial goals and lock in the best rates.

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