Breaking Down the Big Stuff
What is a Good Rate

If you have excellent credit then you can possibly get that rate of 5.875 "for the sake of numbers" If you don’t have excellent credit – join the club - you will have lower scores. 

2- Let’s Talk About Scores
Scores are divided into three different sections. and there are many terms but for this article we will call them; A, ALT A, and B.

A = good credit 640 and up with no late payments on a mortgage and a few other factors.

Alt A = -+ 580 with one to no late payments and a few other factors.

B = other credit scores down to 500 in some cases lower but that is CASE BY CASE . 

This is the first question asked by lenders and it is the first determining factor for most loans. Depending on what your credit grade is A, Alt A, or B, there is a different start rate and each lender may have a different start rate with adjustments, guidelines and documentation needed to do a loan with that company. 

3- The Lender Selection
Once a lender has been chosen we check their rates, adjustments, guidelines and documentation. All lenders have adjustments for their rates.  An adjustment is something that is added or subtracted in some cases to the rate that you have on your mortgage. Documentation styles vary also and is factored in to your mortgage.

For example, you have full doc, lite doc, no doc, true no doc, stated, nina,  just to name a few but i dont want to confuse you (maybe I’m too late) Just make note that they exist and they are factors that your loan officer will determine which one to use.
             
4-Adjustments are for more than just your pants
Now that you have a lender let’s go through some of the adjustments.  Again I can only give you a brief description or list of adjustments (stay awake now).

We have adjustments such as CASH OUT, this increases risk and that increases your rate.  We have three level of LOAN AMOUNTS, CONVENTIONAL, JUMBO, and SUPER JUMBO (sounds like an order at a fast food restaurant) “can you super jumbo that for me - and add a diet coke” the average person falls into conventional and in some areas such as California  they fall into jumbo and for the very rich and famous super jumbo (go figure). 

Another adjustment is for ESCROWING some lenders don’t some lenders do. Escrowing is paying your taxes and insurance with you mortgage payment. With the lenders that do they charge an extra .25  to your rate if you don’t escrow.  These are just a few adjustments made by lenders, as I write and if you follow along you will learn what a good rate is.
                           
Just Remember This:
The main thing to remember is lending money is based on risk.  What determines your rate is based on lenders calculating your risk. The factors that calculate risk are how much and how long and by whom and do they pay everyone else, and how much do they owe everyone else. 

What’s the Real Deal
Risk is the real factor. I’m sure you can see how that is.  This by no means is all there is to getting a loan.  This is to help you understand that a good rate takes all these things into account. Everyone is different.  So the real question becomes what is a good rate for me.

Ask yourself this question.  “Would you give the same rate to a person who  owes money as the person who doesn't owe money and pays their bills on time?”. 

Banks think this way, they are in the business to make money and when they loan money they are taking a risk on you, so the less risky you are to the lender the better your rate. 
You are a greater risk with lower scores and late payments which equals higher loan amounts.

The up side is there are lenders stretching the envelope of risk and this is where a good loan officer comes in. He should be able to find the lender willing to do your loan. They are out there even if you have no credit. 

But that’s another article!

Next article: Choosing the right company for your loan.

Antonio Feagen is a Washington Informer contributing writer and the owner of Feagens Financial. He provides financial advice to the average person by breaking down the big stuff to make it easy to understand the world of mortgages and financing for your dream home. You can email him at feagensfinancial@yahoo.com for questions about your specific needs.

by Antonio Feagen
WI Contributing Writer

A good rate is determined by many things.  The first thing people think about is what the market is doing. That my friend is irrelevant.  What is relevant is a few factors that determine your rate.   Ok back to the market.  If the quoted rate you hear is 5.875 you think “why cant I get that rate”. After this article you will understand why you can or can't get the rate you hear on the radio.

But first let’s look at some of the factors that help determine your rate:

1- Credit and Payment History
These are the first indicators as to where you can get a mortgage.