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 Mortgage Cost & Credit Score The latest saga in the mortgage crisis will hurt you if you don't have a good credit score and you want to buy a new house. While the government just finalized a plan that will help some people who already have sub-prime loans, those not affected by the rescue, will feel the pinch. Local 12's Paula Toti has details in this Money Alert. A letter has been circulating around lending institutions in the Tri-State the past few days, saying the cost of borrowing money is going up for many people based on their credit score. It's a move started by Fannie Mae and followed by Freddie Mac. If you don't have good credit, and don't have 30 percent to put down on a home, listen up. For years we've heard if you don't have excellent credit - a credit score over 750 - you're not getting the best deal when you go to get a mortgage. It's true, but lenders say the added costs have been relatively small. "There may be a little in some programs over the years," said Dan Brady of Tri-State Mortgage. "But it may be enough difference to move some costs but not affect the interest rate." Not anymore. Now there's a hefty price tag for credit scores from 620 - 680, and the added cost for a mortgage is spelled out, not shrouded in secrecy. "And on the low end, if you're 620 or below, you will pay two points in connection with your loan," says Brady. That means if you're buying a $100,000 house, add $2,000 to your closing costs. Or 1/4 - 3/8 percent to your interest rate. On the higher end of the scale, if your score is 679 add $750 to the cost of getting that $100,000 home. You can avoid the extra money if you have 30 percent down. But most people, especially with only fair credit, don't have that kind of cash. It's estimated the average credit score in the U.S is 696, very close to that 680 cut off. If you're close, be especially careful with credit card debt over the holidays. Some lenders are already charging the higher fees, while some are waiting until January. Tuesday afternoon the Federal Reserve will make a decision on short term interest rates that could affect some mortgages. The Fed is expected to cut rates, in part to avoid a recession. Paula will have more on that, and what a recession means Tuesday on Local 12 Live at 5:00 p.m. News sourse |
