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One Extra FICO Point Can Save You Thousands of Dollars

 

Having a good FICO score (above 740) can save you thousands of dollars in mortgage fees.

Fannie Mae has a Loan-Level Price Adjustment (LLPA) Matrix.  This chart shows you the extra that is charged depending on your credit score and how much you put down.

For example, take a look at the figures that I circled in red.  You are charged a full extra point in fees if you have a credit score of 679 vs. 680 for a loan where you put 20% down.

On a $300,000 mortgage, that would be an additional $3000 in upfront fees that would be required.  If you didn't want to pay it upfront, you could roll it into the interest rate which would increase your rate by about 0.25% .  Every point is equivalent to roughly a 1/4 % increase in your mortgage rate. So in this example, a instead of a rate of 4.0%, you would get a rate of 4.25%.

 

myFICO.com has a calculator that estimates the different pricing for different credit scores.

 

 

This is why it's impossible for a lender to quote you a particular mortgage rate without knowing your FICO score.  If they do, they are just making assumptions.  If the next lender makes different assumptions you'll be comparing apples with oranges.

You should know what your FICO score is before you start talking with any lenders.  You can have a lender pull your credit score but every inquiry will bring your score down a bit.  If the inquiry is made by the consumer, your credit score isn't affected. 

Don't waste your time with the "free" credit scores.  Those use a different scoring system.  They aren't the FICO scores that most lenders use.  Also, you are entitled to your free credit report every year but that report doesn't include your credit scores. It's just a report with all of your credit accounts.

I wrote a separate report on what you get with the free credit report sites.

You can go to  www.myFICO.com . The three scores will cost you $59.85.  There are three credit bureaus and your score will probably differ on all three.  Usually a lender will use the score in the middle as the one to base your pricing on.  

Knowing exactly what your FICO scores are allows you to plan ahead.  If your score is well above 740, you are set.  There's really no difference between a 760 score and an 820 score except for bragging rights.  But as you see from the original example, a change in one FICO point can mean thousands of dollars.

 A good loan officer can usually help you get your FICO score up a few points to the next tier of pricing.  Maybe you have one credit card that is maxed out which is making your credit utilization ratio high.  Possibly by splitting the balance over two credit cards your credit utilization ratio might be lowered which might increase your credit score just enough to make a difference.  The loan officer can then help you with a rapid rescore to get the changes recognized by the credit bureaus in a few days instead of waiting a month.

If you are frugal like I am, there's a way to actually get all FICO scores for free if you have the right credit cards.

The Discover Card   gives you your FICO score from TransUnion

The Chase Card gives you your FICO score from Experian

The Citi Card gives you your FICO score from Equifax

If you have these cards, use them.  If you're like me, you probably have these cards and didn't realize they had this nice little benefit.  But don't get new credit cards just for this reason because new lines of credit can ding your credit scores.  Because of this, it's probably best to just spend the $59.85 at www.myFICO.com and not take the chance of it affecting your credit scores.

 

 

Tim Maitski
Atlanta Communities
www.HomeAtlanta.com
404-216-0472

 

 

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Our market area is in the north metro Atlanta area.  We service Cobb County, north Fulton County, Dekalb County, Forsyth County and Gwinnett County.  We are very familiar with Sandy Springs, Dunwoody, Marietta, Roswell, Alpharetta, Buckhead, and Midtown. 

We have sold homes inside the perimeter and outside the perimeter.  We can't know everything so for clients who want to look for property in Peachtree City, Newnan, Stone Mountain, Douglasville, Macon and areas further out we will gladly recommend a good agent who specializes in those areas.

We help buyers negotiate with builders for residential new construction houses. New houses in Atlanta are hot right now. We can represent you in the purchase of your new house built by any of the following builders: Torrey Homes, MDC Homes, Centex Homes, Pulte Homes, Morrison Homes, Ryland Homes, John Wieland Homes, Winmark Homes, Meridian Homes, John Willis Homes, Benchmark Homes and many more home builders.

We can help clients find short term apartments for rent but normally we don't work with clients who are just looking for rentals.  We do help clients find Atlanta condos.  We can also help you purchase HUD homes in Atlanta.  We are an authorized agent with them and have the HUD key to get into HUD homes.  We have access to foreclosure homes that banks want to sell.

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All information about homes from the Atlanta MLS home search engine is input by thousands of individual real estate agents throughout Atlanta and is made available through a service called ListingBook. We provide access to this data for the convenience of our clients.  We have no control over this database.  All information on this web site is copyrighted and intellectual property of HomeAtlanta.com. It is deemed to be current and accurate, but is not warranted. 2002. Tim is a licensed Realtor with Atlanta Communities Real Estate Brokerage.

Tim Maitski is a member of the Atlanta Board of Realtors

 

01/07/2016