Does this sound about right?? (loan, interest rate, 401k, approved)

[noellea]

I am looking to purchase a home for $141,000. My current mid range credit score is 595. I am going with an FHA loan because I only have 3.5% to put down.

The rate my mortgage broker quoted me is an interest rate of 6% and on top of the truth-in-lending disclosure statement is lists the apr at 7.662%. What does that mean? Is that a pretty standard rate for someone in my circumstance?

[TimtheGuy]

Originally Posted by noellea

I am looking to purchase a home for $141,000. My current mid range credit score is 595. I am going with an FHA loan because I only have 3.5% to put down.

The rate my mortgage broker quoted me is an interest rate of 6% and on top of the truth-in-lending disclosure statement is lists the apr at 7.662%. What does that mean? Is that a pretty standard rate for someone in my circumstance?

No idea. I am surprised you can get approved at all with that credit score. 6% is certainly higher that the market rate right now by at least 1%.

[chet everett]

At a certain point the "penalty" for having a bad credit score raises one's interest rate so much that it probably makes sense to reconsider purchasing.

In all seriousness the credit score tells lenders that you have had trouble with paying things off in the past, do really think it makes sense to pay such a high rate? I would rather see you rent and improve your credit score by becoming a better borrower over time than risk high interest and continued poor credit habits...

[noellea]

Renting in my city isn't any cheaper than purchasing a home. In most cases it can be more expensive to rent than to own. Yes my score isn't perfect thanks to some frivolous spending habits in college. I've paid off all of my debts (settled which does not look good). Renting a home in San Antonio costs just as much (sometimes even more) as buying. I have a stable job, put money into savings each month, pay into my 401K, and keep up to date on my bills.

I have twin 2 yr olds and would like to have them in a house as opposed to an apartment. Having a "home" for them to grow up in is really important to me.

After finding out that my rate was 6% I have questioned renting for a year but am afraid of the unknowns. Will I find a house in a great neighborhood, great schools, and great space for my family at the price that I am getting on house? Will the rates increase to 6% in a year anyways? I'd lose my earnest money $850 (my mortgage broker quoted me 5% when she did my prequal which is why I went through the whole thing).

[chet everett]

Your rate is not truly 6%, it is an APR of 7.662%. You are paying a BOATLOAD of upfront fees. That is VERY VERY high. I really am concerned that you are being fleeced. The loan originator is NOT DOING YOU ANY FAVORS by front end loading a MOUNTAIN of costs into your loan and taking a hefty commission for their "ingenuity"...

http://creditboards.com/forums/index...owtopic=395329


Have you really calculated the total cost of ownership?

You are getting penalized SEVERELY for your poor credit score -- as Tim suggests many / most lenders simply are not making loans for folks with credit scores as low as yours.

I don't doubt that you may have done a lot to clear up your debts, that is a good thing. Unfortunately your credit score does not reflect those things. Your scores makes it easy for lenders to either flat out reject you OR charge ridiculous rates.

If you rent for a year or two and your score increases to the point where you are being charged a rate more in line with what other borrowers are being quoted you will be MUCH better off.

[noellea]

Thanks for the great feedback chett! I feel as though I am so far into the process that I can't back out now. I was working with a mortgage broker who helps low score clients get their scores up. However, all of the things I did didn't produce the results we were hoping for. I was supposed to have my score up to 620+, but like I said, it just didn't get there. So when I went to go in to get the final APR/percentage rate it ended up being quite higher than I was originally told. That is a $100 increase on the mortgage payment each month!