Does FHA rate change depending on credit score (loan officer, interest rate, credit card)

[2nsian]

Hello folks,

I was taking to my loan officer today, I informed her that my credit rating should be higher than when she first pulled it. When she pulled my median score was 686 2 months ago. I expect it to be hovering around 700. Deleted few baddies and paid down utilization. She said that for FHA as long as your score is above 640. It will be the same whether it's 686 or 700. How true is this ? I thought your rate should decrease as your score increases in increments... 660 1 rate, 670 a better rate 680 an even better rate etc until you reach 720 or 740.

Please advise she offered me a 5.375 as of day based on the 686 rate.

[sportsgal]

I was told the same thing by our loan officer. "FHA rates aren’t as sensitive to credit scores as conventional loans." I inquired b/c hubby's average credit score is about 50 pts. higher than mine (765 vs. 715, so neither is “bad”). I thought it might reduce our rate to include him only on mortgage and both of us on the title. Wouldn’t make a difference in the interest rate, I was told.

[ChadMBell]

From some quick research.

FHA Tiers are at 660 and 720. Pricing changes by an 1/8th of a point on each of them (not a huge difference)

My guess is both your loan officers work for bigger banks that have cookie cutter mortgages. One rate fits all. You might get the same rate at either tier, but the cost to do it changes a little bit (almost unnoticeable).

OR

Your loan officer is lying to get the loan done quickly and not worry about it.

And sportsgal, FHA goes off of the lower mid score, so switching your husband to individual borrower would reduce your rate (or cost of the rate).

[TimtheGuy]

I have never seen a "price hit" for credit score on a FHA loan. I.E. the guy who is a 660 gets the same deal as the guy who is 760.

For the few lenders that might still offer FHA for scores under 620, they probably have a hit.

[VictorBurek]

It matters much more on conventional mortgages to have a higher score. Best rates go to consumers with above a 740 score. On FHA, 620 to 659 are in one group... 660 to 740 another and above 740.

[TimtheGuy]

5.375% seems high too unless you have a really small loan amount, like under $100k.

I am locking a $270k FHA deal at 4.75% today with a 1% origination fee.

[ChadMBell]

Directly from pricing. It's also affected by LTV, so it doesn't always change the pricing if LTV is low.

As stated, it makes a much bigger difference on conventional.


The values in the grid include all the adjustments below.
ReasonPointsRateMargin FICO is >=7200.1250.0000.000 Total Adjustments0.1250.0000.000


Grid is hard to read, but .125 change in price. Again, not a big difference, but it's there.

[ChadMBell]

Your Loan officer is offering 5.375% rate because it's paying them 2.5% of your loan amount for the higher rate.

[sportsgal]

Thanks, Chad. Will check into that. Since getting my original credit scores more than a month ago from a different lender, I have paid off the only individual credit card on which I carried a balance (though we still have a joint card with a modest balance), so my new scores could be above 720. If mine is 725 and hubby's is 765, would we still get a lower interest rate if we put him only on the mortgage, since I'm now in that 720+ tier?

And we are using a smaller, local lender, and thus far I have been very happy with our loan officer. She's very quick to respond to any concerns or questions and she's clearly outlined the process for us. Our FHA loan is a little more complicated because it includes a full 203K rehab loan, and she specializes in these types of loans. We will definitely get other GFEs once we have an amended contract (we requested a reduced sale price based on more-than-anticipated repairs necessary), but all else being close to equal, I would definitely go with the lender who's helped us navigate this 203K quagmire this far and who's always quick to return emails and answer calls.

[2nsian]

Originally Posted by ChadMBell

Your Loan officer is offering 5.375% rate because it's paying them 2.5% of your loan amount for the higher rate.

Nice... I checked with another loan officer and she informed me that she will be able to make it happen for 5%. Is the difference believable?