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I was just told by the mortgage lender representative that our credit score (804) and down payment amount (20%) has no bearing on the interest rate of our potential loan because interest rates are set by the government. After doing some research, this seems only partially true. Can someone explain to me how this works? It seems the government sets rates but then banks can chose what they offer? Am I correct in thinking that perhaps the rep. is skirting the answer?
I would find a new lender, as it can't be a good sign that you are dealing with a total idiot who is giving you false information or is deliberately lying to you.
If you are getting a VA, FHA or USDA loan, there could be some truth to what the bank said. The playing field for those loans do have a basic requirement for the best rate and having an 800 score isn't going to get you a better deal than someone with a 720 score.
Agree with smart money that an 800 credit score won't get you any better rate than a 720 on a government backed loan, but want to add that the government DOES NOT set the interest rate. Run from that loan officer. He's either lying or has no clue what he's talking about!
Listen to the others. I recently closed on a condo using a VA loan. We ultimately settled on a 3.75% interest rate (my credit score is in the high 700s), but if I put some money down was looking at between 3.25% - 3.5%.
Government loan pricing doesn't vary with regards to credit score, at least where I work it doesn't. I've had folks with 640 credit get the same pricing as 740 or 800 credit.
Now conventional, that's a different story. If you have 20% down, hopefully your lender should know better than to put you into a government loan. I had somebody walk in a couple of months ago with good credit who was putting 50% down, and some other loan officer she talked to tried to put her in an FHA loan for some reason.
I was just told by the mortgage lender representative that our credit score (804) and down payment amount (20%) has no bearing on the interest rate of our potential loan because interest rates are set by the government. After doing some research, this seems only partially true. Can someone explain to me how this works? It seems the government sets rates but then banks can chose what they offer? Am I correct in thinking that perhaps the rep. is skirting the answer?
Thanks
How about: What kind of loan is it and what is their offer?
It was a conventional loan. I've decided to move on to other lenders which did give me better offers. Thanks for the feedback. I was beginning to feel the loan officer was less than honest on several issues.
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