Is 7.4% APR a fair rate for $80,000 home loan with no money down?

Question

My credit score is 725 and I am a first time home buyer. I went to a local bank and was wondering if I could do better than 7.4%. Thanks.

Answer 1

Every other answer is wrong...APR is not your interest rate. Annual Percentage Rate is the total cost of the loan, not the interest rate cost of the loan. The total cost of the loan includes PMI, which is not in the rate but is certainly a large cost of a loan. In other words, if the PMI is 1% per year (which it is), it would comprise that amount of the APR, making the actual interest rate more like 6.4%, if you had no other closing costs - - but you probably do have other closing costs. Furthermore, if you have any other closing costs, they, too, would add to the APR while not adding to the rate. As for the simple interest rate, if your 100% financing is at 6.375%, which is close to what you probably have, ignore what others are saying about rates being lower. 100% financing also carries a higher rate than a 95% loan, so you're actually probably right at the market, not above it. In today's market, a 95% loan would carry a rate of around 6.00%, and a loan at 100% would carry a rate of 6.375% - - especially for loans under $100,000, which is considered relatively small and more expensive for a lender to originate and therefore, needing a higher rate of return to cover it.

Answer 2

It all depends, but you can probably do better. A lot of things will go in to your rate, though. Are you financing 100% of the home's value? Are you doing a no-doc or low-doc loan? Have you been with your current employer less than 2 years? Do you have any negative things in your credit history that appear but don't necessarily affect your score? Are you doing an interest-only program? If you answered yes to any of these questions, you might not be able to do much better than 7.4%. But, of course, shop around just like when you're buying anything else.

Answer 3

Because of the recent issues, 100% financing is much harder to get but still available. Naturally talking to a couple reputable lenders will help you get the answers you need. One thing you may want to consider is an FHA loan. FHA loans have become much more popular in the last year because of the tightening of lenders policies. They are not based on your FICO score but on your credit history. If you have a clean credit history over the last 12 months, itis possible to get a loan even if your credit score is below the norms. As for foreclosed homes, you can sometimes get a good deal but you have to be very careful what you are doing. Most of them are in very poor condition as so many of the owners, knowing they were going to be foreclosed on let hem go and trash them. Another problem with foreclosures is that in a lot of cases, entire subdivisions are being hit by foreclosures, especially starter home S/Ds. In those cases, property values drop and so your home may end up depreciating. That is why so many people in those S/Ds are upside down in their mortgages. Because of the foreclosures and depreciation, the homes are worth less than they paid for them and they owe more than they would be able to sell it for. In reference to the reply about the interest rates and now not being a good time to buy, nothing could be further from the truth. Most of the country is in a strong buyers market as there are more homes available for sell than there are buyers so you can get a better deal now than when the market picks up again. Also, intersest rates are still very good. You can still get rates under 6% with good credit. Anyone that thinks interest rates are bad should have been around in the early 80s when they hit 20%. The first house I bought ad a rate of 13.5%

Answer 4

With THAT credit score..I'd say YES! But..it also depends on the mortgage rates in your area. Mortgage rates can fluctuate greatly, depending on how much your D.P. is (if at all), how much the loan is, how old/new the property is..etc...etc...there are countless factors. First, I would definitely ask your mortgage adviser what the "formula" was that they used to come up with that APR. If you're not satisfied with their reasoning, there is nothing stopping you from seeing other financial institutions to get pre-approved. Also, have you looked into first-time-homebuyer programs that'll help you pay for closing costs, etc? Its a definite plus, and may just take enough pressure off of you so that if you absolutely CAN'T get a better rate, you wont feel the "burn" quite as much. Good Luck!!

Answer 5

With a credit score like that, you should be able to get something at a better rate. However, 7.4% is a good rate. Just make sure it's a fixed 15 or 30 year mortgage, not a variable rate.

Answer 6

You can do alot better....My credit score was 626 and I was just 2 years out of a bankruptcy and I got a 30 yr FHA @ 6.5% with only a small amount down. Give Wells Fargo a call...they are a major mortgage company and offer competitive rates. Do yourself a favor and shop around.

Answer 7

that rate is too high for such a small loan, chesk on line under home loans and you'll get a feed back on many of them, it should be about between 6.25 and about 6.75 and no more, if for less than 30 years it could be 1/4 to 1/2 percent lower.

Answer 8

My Goodness! I mean that's not bad but I know people with lower scores that have around 5%! Definitely shop around.

Answer 9

You can do MUCH better than that.
I have 5% and a little lower score than you.

Answer 10

It depends on where you are. Many companys are much lower than that. Shop arround the net.